September 26, 2008
Elaine Meinel Supkis
As Libra takes over the Zodiac, all books must be reconciled, all negative and positive numbers must add up to '0'. Paulson's sleep is now being disturbed greatly by the Watchers who love destroying stuff. He is falling apart even as all his beloved, gnomic schemes unwind or disintegrate. The bad news is coming in so thick and fast, I can't keep up with it. So it is time to go back into the past! When in Congress, I discovered virtually no one regulating our nation's business understood even the slightest things about the Derivatives Beast. It is now been unleashed and has broken out of the Cave of Wealth and Death and is in the process of eating all earthly PAPER wealth. So I wish to re-examine this business yet again. See if we can figure this all out.
Over-the-counter (OTC) derivatives
are contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. Products such as swaps, forward rate agreements, and exotic options are almost always traded in this way. The OTC derivative market is the largest market for derivatives, and is unregulated. According to the Bank for International Settlements, the total outstanding notional amount is $596 trillion (as of December 2007). Of this total notional amount, 66% are interest rate contracts, 10% are credit default swaps (CDS), 9% are foreign exchange contracts, 2% are commodity contracts, 1% are equity contracts, and 12% are other. OTC derivatives are largely subject to counterparty risk, as the validity of a contract depends on the counterparty's solvency and ability to honor its obligations.
Actually, the goofy gnomes of the banking districts stuffed the gullet of the Derivatives Beast so mightily, it grew to over $675 trillion before it broke its chains and went on the rampage. I would suggest, it isn't growing anymore. Indeed, it is totally magical. It is pure numbers. It is magic formulas concocted by expert mathematicians and magicians hired at a PITTANCE by the gnomes. The job of these magicians using magic numbers was simple: devise a method of circumventing Risk. Of course, Risk is the daughter of the very unnatural goddess who is the eldest of them all, Lady Luck. Lady Luck is the builder of the Cave of Wealth and Death. Lady Luck loves random numbers and coincidences. She adores convergences of opportunities. She is also the mother of the Fates and the Furies. And above all, she is the mistress of the goddesses who live in her cave: Inflation and Depression.
As I said in the past, the best way to really understand mystical, mysterious financial instruments is to use mythology and ancient religious beliefs. Just as bankers assign names to instruments they create out of thin air and numbers, I rename them with mythological/magical tags. This shows more clearly, their true dual nature. For just as bankers create OTCs in order to eliminate risk, I know that the Goddess of Risk perks up and sharpens her claws and brushes her teeth in preparation of future dining opportunities! As banking gnomes celebrate hoodwinking Her, She laughs as She licks Her chops. Hoodwinking is an ancient hawking term. The falconer puts this hood over the head of the bird and feeds it while it is blind. This tames the creature so it hunts only for them.
But when gnomes hoodwink Risk, She doesn't care. For She is like all Her sisters: She can see the future! Not with Her eyes but with Her whole being. She lives outside of the human time stream, after all. The only way to deal with Risk is to treat Her with greatest care. One must assume that Risk is standing nearby, ready to unleash death and destruction. The key is to honor Her yet not let Her stop us from taking risks. We won't prosper unless we do things that are dangerous in some fashion. For example, I take a risk when I climb on the roof. I could fall. But I want to fix things on the roof so I take the risk.
Continued>>>
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