"Most if not all derivatives contracts are
predicated on interest rates because derivatives, to a great extent, are
Interest rates set a valuation on derivatives products as
they measure oppor- tunity cost, i.e. the profit foregone by putting money into
product A when money could also theoretically be made by investing in product
Manipulating these rates, particularly in the interest of protecting
derivatives investment, does indeed gum up the "immense and recondite"
financial machinery of the world.
The interest rate derivatives market
(in which the underlying asset is the right to pay or to receive a notional
amount of money at a given interest rate) is the world's single largest
The Bank for International Settlements (BIS)
estimated that in June 2012 the value for over-the-counter interest rate
derivatives contracts (in notational terms) totaled $835 trillion; 90 percent
of the world's top 500 companies now use them to control their cash flows." -
"Between 1973 and 1985, US financial sector
accounted for about 16% of domestic corporate profits.
1990s, it ranged from 21% to 30%.
After 2000 it soared to
41%." - David Brooks
Finance and insurance together
account for less than 4% of G.D.P.
"After 1980, in
the deregulation minded
Reagan era, old-fashioned banking was increasingly replaced by wheeling and
dealing on a grand scale.
securitization to increase their risk. In the process they made the economy
more vulnerable to financial disruption." - Paul
Dow Jones Industrial
Average contains not a single financial corporation.
sudden failure or abrupt withdrawal from trading of any of these large US
dealers could cause liquidity problems
in the markets and could pose risks to federally insured banks and the
financial system as a
In some cases intervention has and could result in a financial bailout paid for or guaranteed
by taxpayers."- Charles A. Bowsher, Comptroller General, Government
Accountability Office 1994
Myron Scholes, the "father" of financial
derivatives, wins the Riksbank Prize in
Economics for inventing the model that has led to financial derivatives.
Myron Scholes later declares
derivatives and credit default swaps have gotten so dangerously out of hand
that authorities should shut down the market and start over with regulation in
place to begin with.
Brooksley E. Born, Commodity Futures Trading Commission
chairwoman, is concerned that unfettered, opaque trading could "threaten our
regulated markets or, indeed, our economy without any federal agency knowing
about it," calls for greater disclosure of trades and reserves to cushion
against losses and seeks to extend the Commodity Futures Trading
Commission regulatory reach into derivatives.
Born's opinions incited fierce opposition from top officials of the
Federal Reserve and the
Securities and Exchange Commission
including Alan Greenspan* and
Robert Rubin* who claim traders would
take their business overseas.
derivatives serve important economic functions, these products, like any
complex financial instrument, can present significant risks if
A number of large, well-publicized financial losses over
the last few years have focused
the attention of the financial services industry, its regulators,
derivatives end-users and the general public on potential problems and abuses
in the OTC derivatives market." - Commodity Futures Trading Commission,
What is a 'Derivative'?
What is an 'Economic Derivative'?
insight into OTC Derivatives
Larry Summers, deputy secretary of
the Treasury, Robert Rubin, secretary
of the Treasury, and Alan Greenspan, the chairman of the Federal Reserve work
overtime to insure that derivatives are not regulated.
Larry Summers testifies before
Congress that "the shadow of regulatory
uncertainty over an
otherwise thriving market - raised risks for the stability and competitiveness
of American derivative trading."
Larry Summers blasted the Commodity Futures Trading
Commission for having raised" the possibility of regulation over this
Even "small regulatory changes," Larry Summers cautioned,
could throw the whole system out of whack.
Larry Summers, Alan Greenspan and
Robert E. Rubin
recommend that Congress permanently strip the Commodity Futures Trading Commission
of regulatory authority over derivatives.
selling of securities to
customers and shorting them because they believed they were going to
default is the most cynical use of credit information that I have ever seen." -
Sylvain R. Raynes2006
Wall Street introduces
a new index, the ABX, that becomes a way to 'bet' on the value of
This index, modeled on the
Enron Trading Desk,
allows traders to bet on or against pools of mortgages with different risk
characteristics using variable stock indexes enabling traders to bet on whether
the overall stock market, or technology stocks or bank stocks, will go up or
Goldman Sachs did quite well on
the collapse using the ABX to bet against the housing market.
Street, with Goldman Sachs leading,
inflated through deception a credit bubble that burst and cost tens of millions
of Americans their jobs, incomes, savings and home equity.
"I continue to be
concerned about the
influence of pooled vehicles in the
marketplace. I see it
as a ticking time bomb that is going to blow at some point." - Securities and
Exchange Commission Chairman William H. Donaldson, May 24, 2007
What is the difference between exchange-traded funds and mutual
JP Morgan Chase generates $5.6 billion profit.
Matt Zames, a Long-Term
Capital Management veteran, runs the JP
Morgan Chase derivatives trading
Chase profits from the collapse of
Lehman Brothers and the
takeover of Bear
JP Morgan Chase dominates
trading - $87.7 trillion worth of outstanding
as of September 30, 2008.
"In the last quarter
of a century the whole American economic system has lived off the
speculations generated by the financial
sector - sometimes given the acronym FIRE (for finance, insurance and real
estate). FIRE has grown exponentially while, in the country's industrial
heartland in particular, much of the rest of the economy has withered away.
FIRE carries enormous weight and the capacity to do great harm." - Steve Fraser
banks are trying to win back their losses by arbitrage operations,
borrowing from the Federal Reserve at a low interest rate and lending at a
higher one, and gambling on options.
a zero-sum game: one losses, one
So the banks
collectively are simply painting themselves into a deeper
They hope they can tell the Federal Reserve and Treasury to keep bailing
them out or else they'll fail and cost the FDIC even more money to make good on
insuring the "bad savings" that have been steered into these bad debts and
The Federal Reserve
and Treasury certainly seem more willing
to bailout the big financial institutions than to bailout savers,
pensioners, Social Security recipients and other small fry.
follow the traditional "Big fish eat little fish"
principle of favoring the vested interests." - Michael Hudson
Dimon, chief executive officer of JP Morgan Chase, said the US government
can rescue the
financial system by the end of the year if officials start cooperating and
stop the "vilification" of
"Giant corporations arose early in the last century
followed by wars, depression, and more wars.
and monopolies resulted competing not on price but mainly in the areas of
cost-cutting and the sales effort.
Beginning in the late 1960s and
1970s, financialization came to the rescue, and "to some extent (shifted)
control over the economy from corporate boardrooms to the financial markets.
Corporations were increasingly seen as bundles of assets, the more
liquid the better.
Financialization produced new outlets for surplus in the
FIRE sector (finance,
real estate), mostly for
not capital goods investments
in plant and equipment, transportation, and
public utilities that earlier
fueled business cycle expansions.
the 1970s, it was about one-and-a-half times GDP.
The 1980s saw
an unprecedented upsurge of debt in the
By 1985, it was double, and by 2005 it was three-and-a-times
GDP, rising, and approaching the $44 trillion (level) for the entire world.
Ever since, the way was open for a proliferation of financial
instruments and markets, which (until the present) proved to be literally
warned about "enterprise
becoming the bubble on a whirlpool of speculation" like in the 1920s, the
price being the Great Depression.
grow and to bursting.
Minor by comparison, the 1997-98 Asian crisis
showed how fast contagion can spread.
Today it's global and
No one's sure how to contain it, so bankers are
printing trillions in a desperate attempt to socialize losses,
privatize profits, and
pump life back into a corpse
through a sort of shell game or
grandest of grand theft process
of sucking wealth from the public.
Speculation and debt need more of it to prosper, but
in the end it's a losing game." - Stephen Lendman
This web site is not a commercial web site and
is presented for educational purposes only.
This website defines a
new perspective with which to engage reality to which its author adheres. The
author feels that the falsification of reality outside personal experience has
forged a populace unable to discern propaganda from reality and that this has
been done purposefully by an international corporate cartel through their
agents who wish to foist a corrupt version of reality on the human race.
Religious intolerance occurs when any group refuses to tolerate religious
practices, religious beliefs or persons due to their philosophical ideology.
This web site marks the founding of a system of philosophy named The Truth of
the Way of the Lumière Infinie - a rational gnostic mystery religion
based on reason which requires no leap of faith, accepts no tithes, has no
supreme leader, no church buildings and in which each and every individual is
encouraged to develop a personal relation with the Creator and Sustainer
through the pursuit of the knowledge of reality in the hope of curing the
spiritual corruption that has enveloped the human spirit. The tenets of The
Truth of the Way of the Lumière Infinie are spelled out in detail on
this web site by the author. Violent acts against individuals due to their
religious beliefs in America is considered a "hate crime."
This web site
in no way condones violence. To the contrary the intent here is to reduce the
violence that is already occurring due to the international corporate cartels
desire to control the human race. The international corporate cartel already
controls the world economic system, corporate media worldwide, the global
industrial military entertainment complex and is responsible for the collapse
of morals, the elevation of self-centered behavior and the destruction of
global ecosystems. Civilization is based on cooperation. Cooperation does not
occur at the point of a gun.
American social mores and values have
declined precipitously over the last century as the corrupt international
cartel has garnered more and more power. This power rests in the ability to
deceive the populace in general through corporate media by pressing emotional
buttons which have been preprogrammed into the population through prior
corporate media psychological operations. The results have been the destruction
of the family and the destruction of social structures that do not adhere to
the corrupt international elites vision of a perfect world. Through distraction
and coercion the direction of thought of the bulk of the population has been
directed toward solutions proposed by the corrupt international elite that
further consolidates their power and which further their purposes.
views and opinions presented on this web site are the views and opinions of
individual human men and women that, through their writings, showed the
capacity for intelligent, reasonable, rational, insightful and unpopular
thought. All factual information presented on this web site is believed to be
true and accurate and is presented as originally presented in print media which
may or may not have originally presented the facts truthfully. Opinion and
thoughts have been adapted, edited, corrected, redacted, combined, added to,
re-edited and re-corrected as nearly all opinion and thought has been
throughout time but has been done so in the spirit of the original writer with
the intent of making his or her thoughts and opinions clearer and relevant to
the reader in the present time.
Fair Use Notice
This site may contain copyrighted material the use of which has
not always been specifically authorized by the copyright owner. We are making
such material available in our efforts to advance understanding of criminal
justice, human rights, political, economic, democratic, scientific, and social
justice issues, etc. We believe this constitutes a 'fair use' of any such
copyrighted material as provided for in section 107 of the US Copyright Law. In
accordance with Title 17 U.S.C. Section 107, the material on this site is
distributed without profit to those who have expressed a prior interest in
receiving the included information for research and educational purposes. For
more information see: www.law.cornell.edu/uscode/17/107.shtml. If you wish to
use copyrighted material from this site for purposes of your own that go beyond
'fair use', you must obtain permission from the copyright owner.
© Lawrence Turner
All Rights Reserved