Squids, Morgans & Counterparty Risk: Blowing Up The World One Tentacle At A Time

Reggie Middleton's picture

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phal·lic (flk) adj. 1. Of, relating to, or resembling a phallus. 2. Of or relating to the cult of the phallus as an embodiment of generative power: phallic worship. 3. Of or relating to the third stage of psychosexual development in psychoanalytic theory, from about ages three to six, during which gratification is focused on sensations associated with the genital organs. The phallic stage is preceded by the anal stage and followed by the latency period.


Shizzmoney's picture

I wait, even cherish, the day to see if these TBTF banks try to ask us for cash again. 

Then we can finally get the anger to feather and tar Lloyd Blankfein's ass.

dizzyfingers's picture


I'm liking certain ideas in your post, and agree. Heard any  tumbril wheels yet?

CustomersMan's picture





   And when these "elite" institutions, the TBTF Banks have the nerve to ask for additional TRILLIONS in bailouts from the already overburdened, many times robbed and screwed taxpayers, of their representative countries, that is when they will understand the strength of the 99%, and the beheading s will begin in earnest.


  If they even have the nerve to try and collect on these scamming designed pillaging constructs, derivatives.


  The global public knows alot more about 2008,2009 that it did at the time and they are not going to be screwed by a factor of 10X or 100X this time around, not even 1X.


 I would say they (the contracts) are worth far less than the hard drives on which they reside, because having one, or having written one, post 2008 - 2009 may seal your fate and force you to relinquish your head.


Just my impression.

pineyard's picture

OK ... thats a lot of FICTIONAL Money ...US TOP BANKS hold as DERIVATIVES .

I would very much like to know what those Derivates are .                                                                       I have long time been wondering where all the Capital comes from which is able to attcak even Big Countries .Is it in this enourmous DERIVATIVE MOUNTAIN of FICTIONAL MONEY which is the used in lack of REAL CAPITAL to dominate markets ? If such should be the case .. it would explain a lot of things !

Well .. i dont know .. but find it prudent that THE NATURE OF THE DERIVATIVES OF THE BIG US BANKS ARE MADE PUBLIC

terryfuckwit's picture

yes and good luck to the Germans...we have seen countless movies..where the villains cheats and thieves seem invincible because they are so many and so powerful.. but they all kill each other when they find out who's been scamming who...keep stackimg and buy the popcorn..

Mister Ponzi's picture

There is one point, I don't understand. If you are hedged with CDS on your sovereign exposure, how can you be naked as the haircut is voluntary? You are not forced to tender your bonds. EU officials threatened that in this case there will be a hard default - but in this case the CDS would pay out. So, what's the point? If you are hedged with CDS, simply do not tender your bonds. Simple!

Zero Govt's picture

JP Morgan Chase and Goldman Sucks Group among the world’s biggest (snip*traders*snip) mistakes

there fixed it for you Reggie

Steroid's picture


You are wonderful as always. As I figured

You are saying that small movements in risk events can still be managed by the derivative bungee network.

Could you tell what is "small" and quantify the threshold in these movements for the specific events?

In other words, what are the trigger events and their size for a collapse.

Zero Govt's picture

Can I suggest a small event ...Greece is about 3% of the European Govt debt market and the 50% haircuts (to date!) are defaults in name and defaults in nature

But they have not triggered pay-outs in the Credit Default Swaps market!!

Even though Greek CDS's are 3% of the market the implications of the CDS's not being triggered has sent corporate Executives, Risk Officers, lawyers and accountants scurrying to their calculators re-working their financial projections and burning candles in late meetings

Greeces 3% have sent shockwaves through the other 97% of the derivitives market i'm sure ...amongst them the now naked Emperor with no clothes, Lloyd Blankfein



Steroid's picture

So it was handled! That is the point. The market could prepare for Greece for months so when it came the speed was attenuated. 

We have these events globally almost every day now.

What I am saying is it is not the size of the derivatives what matters but the momentum of their movement. Even huge events can be handled if it moves slowly to give time for transactions. However, real time information flow and financial transactions does not allow for delays as used to do when larger events come.

The momentum equals the size multiplied by the speed of the event. Of course, the bigger the size the smaller is the critical speed.

It was the second, the speed of the event what I was asking about.

Zero Govt's picture

this mountain of trouble cannot be controlled by stretching time.. the debt is beyond the means of their economies to repay.

The crude measure is to hold Govt debt up against GDP with most countries now above the 100% Debt/GDP mark considered beyond repayable... I'd put any country above 20% Debt/GDP as already beyond its means and their Govt insolvent!

But regards time this sovereign debt problem has (already) been a slow-mo trainwreck but politicians have zero discipline with their junky credit card spending habits and lack of any plans when raising the money to do more than service the interest let alone repay the capital

They lost control then and there.. what's happening now is out of their control... they're fingers in the dyke of a tsunami ...funny to watch but futile

Steroid's picture

You are absolutely right. There is too much debt.

But the article is about derivatives, monies owed to each other. No new net debt is created as the net is negligible.  

Net is important when the movements are slow, but with the current fast changes systemic risks arise. That is when the gross exposure becomes important.

I think that is what Reggie is talking about. And what I was asking is what event momentum becomes critical? What momentum does separate the risks that still be handled (net events)from those that can not be (gross events)?

Pitchman's picture

Counter Party Risk?  The inevitable result: http://kuroiso.org/

See how $trillions, created out of thin air has exploded the worlds financial sector and how it can disappear as if it never existed:

Evaporation of Wealth on a Vast Scale: How $Millions - Trillions Can Disappear

Also: Life After An EMP Attack: No Power, No Food, No Tr...

- Inflection Point

falak pema's picture

well GS runs the world and surfs the ponzi bubble...can Merkel unseat it before it blows up the Eurozone?...The geopolitics of the race to the bottom. Our wars today are fought with the bodies of the unemployed and the bullets we fire are our fiat spiels spewed out in derivative plays and sudden ambushes. Will the world look like Berlin 1945 and Hiroshima on a global scale when this war is over?

Mediocritas's picture

In essence, what we have right now behind the scenes simplifies to a political battle between Goldman Sachs and Germany. Who will win? The odds are stacked against Germany because Goldman has a whole bunch of bankster allies including Deutsche Bank and most of the Eurocrats.

Reggie makes a compelling case demonstrating just how insanely over-exposed GS is, but let's not forget why they got that way: the confidence of owning US congress. GS is a political beast, more than any other bank, only Germany can slay it.