For decades now we have heard about the U.
S.
deficits collapsing our financial system at varying times in the future.
Perhaps within a decade, or the next five years, or even within this year the bond vigilantes, foreign buyers, or the world will lose faith and suddenly the deficits will not allowed.
U.
S.
, Europe and Japan in Fantasy Land We have also heard that the Japanese debt is beyond sustainable and has been for more than a decade, at 300% of GDP.
The U.
S.
is mega-Greece in every way, with much larger problems and more impact on the world.
Derivatives have also been touted as financial weapons of mass destruction for nearing a decade..
Growing beyond earthly restraints, now into intergalactic numbers of nearly $300 Trillion in notional amounts, derivatives function in an alternate financial universe.
No restraints - such as deliverable real goods or services - limit their trajectory.
Analysts Still Fretting Over Lunatic Financial Numbers Top financial minds have put pen to paper, or Excel to the balance sheets and detailed the numerical death march the U.
S.
, Japan, and even Europe are all on.
Statistics on Medicare payments, Social Security payments, and all manner of entitlements are shown - in red - for the impossible promises they are.
Europe and Japan are in the aging trap where the working population shrivels while the erstwhile retired population explodes.
Like the proverbial comet crashing into earth, or the coronal mass ejection that shuts down the power grid, many financial cognoscenti are awaiting the popping of the derivatives mythical matrix.
With the exception of five of the TBTF (too big to fail) banks, derivatives are quite capable of taking down an institution whose CEO does not play golf with the right central banking crowd.
This article is not intended to diminish the seriousness and corruption the deficit, derivatives and debt numbers imply.
Instead, the numbers are so serious, outsized, and beyond the boundaries that the real, operational economy recognizes, that they must be looked beyond, if not ignored.
Here are some of the drivers for my position of ignoring the derivatives: The growth of U.
S.
bank derivatives.
U.
S.
debt limits.
Roughly speaking, there is 20 times the derivatives volume in dollars to the U.
S.
treasury debt, with both growing at similar rates.
The deficit charts would look similar, growing at investing rates only Kyle Bass could relate to - in the 20% range.
No Reality in Financial Debts, Deficits, Derivatives Long ago, when men in the cities wore 3 piece suits and hats regularly, and most of America rose with their roosters in time to milk their cows, this would not have been possible.
There was a real transaction, a real unit of account, and real laws of the land that prevented financial legerdemain of a scale we now accept as de rigeur.
Mining was the governor of the financial system.
With a general supply increase of 2% of gold into the monetary system, though the occasional Coloma or Comstock lode would drive supply much higher at times, there were still tangible limits dictated by physical limits of land, luck, and labor.
Equivalent results in money supply today can be generated with not so much as the push of one computer key.
There are no physical deliverables.
There are no physical constraints.
No closed loop system defining parameters of when the system must self-correct.
Numbers in our current system can go to "infinity.
" Relatively speaking, they have gone that far and beyond compared to any aspect of relatively that can be quantified in an economic sense.
Our numbers are no longer worth analyzing because they fail to reflect any of the terrain we know as reality.
The derivatives trading between the TBTF 5 banks is a Russian roulette game with all chambers loaded, each bank CEO pointing the muzzle at the fellow bank CEO/ derivatives counter-party, hammer cocked, itchy finger on the trigger, but cannot pull it.
If one of the banks calls the derivatives that pays off, the whole circle of fraud could be destroyed.
The numbers have become meaningless.
Only the fees and premiums are landing in real bank accounts.
Instead of numbers, we can safely fall back into Austrian logical analysis.
Numbers no longer tie to units of account and have not for some time.
When the faith supporting the value of currencies disappears, and the forces behind governments are overcome, then there will be rationality again.
Numbers will matter again.
S.
deficits collapsing our financial system at varying times in the future.
Perhaps within a decade, or the next five years, or even within this year the bond vigilantes, foreign buyers, or the world will lose faith and suddenly the deficits will not allowed.
U.
S.
, Europe and Japan in Fantasy Land We have also heard that the Japanese debt is beyond sustainable and has been for more than a decade, at 300% of GDP.
The U.
S.
is mega-Greece in every way, with much larger problems and more impact on the world.
Derivatives have also been touted as financial weapons of mass destruction for nearing a decade..
Growing beyond earthly restraints, now into intergalactic numbers of nearly $300 Trillion in notional amounts, derivatives function in an alternate financial universe.
No restraints - such as deliverable real goods or services - limit their trajectory.
Analysts Still Fretting Over Lunatic Financial Numbers Top financial minds have put pen to paper, or Excel to the balance sheets and detailed the numerical death march the U.
S.
, Japan, and even Europe are all on.
Statistics on Medicare payments, Social Security payments, and all manner of entitlements are shown - in red - for the impossible promises they are.
Europe and Japan are in the aging trap where the working population shrivels while the erstwhile retired population explodes.
Like the proverbial comet crashing into earth, or the coronal mass ejection that shuts down the power grid, many financial cognoscenti are awaiting the popping of the derivatives mythical matrix.
With the exception of five of the TBTF (too big to fail) banks, derivatives are quite capable of taking down an institution whose CEO does not play golf with the right central banking crowd.
This article is not intended to diminish the seriousness and corruption the deficit, derivatives and debt numbers imply.
Instead, the numbers are so serious, outsized, and beyond the boundaries that the real, operational economy recognizes, that they must be looked beyond, if not ignored.
Here are some of the drivers for my position of ignoring the derivatives: The growth of U.
S.
bank derivatives.
U.
S.
debt limits.
Roughly speaking, there is 20 times the derivatives volume in dollars to the U.
S.
treasury debt, with both growing at similar rates.
The deficit charts would look similar, growing at investing rates only Kyle Bass could relate to - in the 20% range.
No Reality in Financial Debts, Deficits, Derivatives Long ago, when men in the cities wore 3 piece suits and hats regularly, and most of America rose with their roosters in time to milk their cows, this would not have been possible.
There was a real transaction, a real unit of account, and real laws of the land that prevented financial legerdemain of a scale we now accept as de rigeur.
Mining was the governor of the financial system.
With a general supply increase of 2% of gold into the monetary system, though the occasional Coloma or Comstock lode would drive supply much higher at times, there were still tangible limits dictated by physical limits of land, luck, and labor.
Equivalent results in money supply today can be generated with not so much as the push of one computer key.
There are no physical deliverables.
There are no physical constraints.
No closed loop system defining parameters of when the system must self-correct.
Numbers in our current system can go to "infinity.
" Relatively speaking, they have gone that far and beyond compared to any aspect of relatively that can be quantified in an economic sense.
Our numbers are no longer worth analyzing because they fail to reflect any of the terrain we know as reality.
The derivatives trading between the TBTF 5 banks is a Russian roulette game with all chambers loaded, each bank CEO pointing the muzzle at the fellow bank CEO/ derivatives counter-party, hammer cocked, itchy finger on the trigger, but cannot pull it.
If one of the banks calls the derivatives that pays off, the whole circle of fraud could be destroyed.
The numbers have become meaningless.
Only the fees and premiums are landing in real bank accounts.
Instead of numbers, we can safely fall back into Austrian logical analysis.
Numbers no longer tie to units of account and have not for some time.
When the faith supporting the value of currencies disappears, and the forces behind governments are overcome, then there will be rationality again.
Numbers will matter again.