How to Prepare For Round Two of the Great Crisis

Friday, July 29, 2011
By Paul Martin

by Phoenix Capital Research

In order to understand why there will be a second round to the Great Crisis, we first need to understand why Round 1 (2007-2009) occurred. And that cause can be explained in one simple word: derivatives.

As their name implies, derivatives are securities that are “derived” from underlying assets (homes, debt, etc). While they are technically considered “assets” by the financial community, the fact is that they’re primarily financial instruments that Wall Street created to foist on their clients while collecting even larger fees.

Indeed, if you need proof that derivatives are in fact just Wall Street “make believe” consider that the Street refuses to allow the derivatives markets to be regulated in any way (if the value of these “assets” was clear, they could be traded via a clearing house).

As stated before, derivatives are nothing more than fiction (perpetuated by another fiction: that Wall Street is able to value these things or price them accurately). But thanks to Wall Street’s lobbying power, they’ve become the centerpiece of the financial markets.

Consider that the world stock markets are roughly $36 trillion in size. The world bond market is roughly $72 trillion in size. The derivatives market, in contrast, is currently in the ballpark of $600 TRILLION in size.

The Rest…HERE

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