Warren Buffet said this in 2002...In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal. Recently he confirmed he still believe this to be true...
The article below was posted in June 2015 but is most fitting to be reposted today...
Since the United States was first established, the U.S. government has run up a total debt of a bit more than 18 trillion dollars. It is the biggest mountain of debt in the history of the planet, and it has grown so large that it is literally impossible for us to pay it off at this point.
But the top five banks in the list above each have exposure to derivatives that is more than twice the size of the national debt, and several of them have exposure to derivatives that is more than three times the size of the national debt.
That is why I keep saying that there will not be enough money in the entire world to bail everyone out when this derivatives bubble finally implodes.
Warren Buffett is entirely correct about derivatives – they truly are weapons of mass destruction that could destroy the entire global financial system at any time.
Read the rest here...
Now read today's post from Zerohedge
Globally the bond bubble has grown by more than $20 trillion since 2008. Today it is north of $100 trillion, with an additional $555+ trillion in derivatives trading based on it.
Yes, $555 TRILLION, more than seven times global GDP, and more than 10 times the Credit Default Swap market ($50 trillion), which triggered the 2008 Crisis.
By not allowing the bad debts to clear in 2008, the Central Banks conditioned everyone from consumers to corporations to believe that business cycles could be contained and that the bond bubble/ bull market had not ended.
As a result of this, TRILLIONS of dollars of capital have been misallocated. The evidence is everywhere you look. Corporates around the globe have been issuing record amounts of debt, much of it in US Dollars.
Few of these bonds were high quality. Indeed, globally over 50% of all corporate bonds are now “junk.”