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2008: The derivatives bubble
These types of so called investments do not represent partial ownership in a company they do not make capital available for a company to improve or expand its operation they just represent fluctuations in electronic accounts. Plain and simply put it is gambling. A reason that the so called developing countries are making rapid progress in providing their citizens with a more comfortable lifestyle is that their financial economies are being used to create PHYSICAL infrastructure, while in North America the physical means by which we all live does not expand to accommodate a growing population and that which now exists falls in to a state of ruin and our lifestyle continuously degrades. The middle class shrinks, the very rich get richer (on paper only) and ever more people slide into the poverty of our lower class.
That financial derivatives have grown to such an extent is all the more amazing, considering that these instruments simply did not exist 25 years ago. The largest single type of derivatives is interest rate swaps. The amount of derivative paper outstanding--none of which is carried on corporate balance sheets--is now somewhere around twice the total market value of all publicly listed companies in the United States. Note that the figures given are for ten years ago as fantastic as it seems there is no way for anyone anywhere to determine current figures as there is no requirement that they even be listed on balance sheets derivative transactions take place between the board members of the parties involved yup it is all done in private.
A bank spokesman - ``Everybody knew we had $30 billion in assets'' on the
but nobody but a small cadre of regulators and analysts knew we hand $36 billion in off-balance sheet activity.''
The futures markets
Which involves only speculators often linked to the grain cartels, moving paper back and forth, attempting to capture spreads, or drive down the grain price for farmers This market is larger than the New York Stock Exchange; which had a market capitalization of $3.713 trillion, and total value of shares traded of $1.520 trillion in 1991. In 1992, there were 17,552,356 grain futures contracts traded. Of that total, only 64,200 were settled by delivery/cash settlement, meaning that the actual grain produce of the contract was taken for physical delivery. That is but 0.36% of all contracts traded.
At the level of the farmer selling his grain to an elevator, for each sale of real grain--called a hedge--there has to be an offsetting speculative trade to make the market. So, on that first level, there are 128,400 legitimate trades. Then, the local elevator usually sells the grain to the sub-terminal or terminal, plus, the sub-terminal or terminal might have to sell the grain one more time. So, there are three times 128,400 contracts which can be considered legitimate that is 2.2%t of all trades; so 97.8% of all trades are purely speculative, having no connection to the real process involving the farmer and his produce.
After the original global financial collapse of 1930 laws were put in place to dis-allow making the types of transactions which were responsible for the ruination of various types of financial institutions, however during the past 70 years these laws / regulations were one by one quietly repealed by elected representatives the resulting deregulation has allowed the current financial debacle to come about. When we wonder will the citizenry accept that neither unstable financial type accounting nor political rule by untrustworthy people can never, not ever, offer provide their daily doughnuts or any kind of security and demand a change to a new method of social operation compatible with this the modern machine age. Just such a plan does exist and it is described on this CD.
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