Derivatives Clearinghouse Failures Could Bring Down International Financial System

For any financial system to work, it must earn the respect and trust of its participants. This requires every financial instrument to have the integrity as to its true value and redeemability, as readily established through a mutually verifiable transparent mechanism.

Certain problems arise when several participants agree to supplant the entire system for their own exclusive benefit, and to the detriment of the majority of the players. This is exactly what is happening to the derivatives clearinghouse which failed to perform its basic predefined function of making sure all instruments traded maintain their integrity.

Here are some basic definitions:

“A derivative is a security with a price that is dependent upon or derived from one or more underlying assets. The derivative itself is a contract between two or more parties based upon the asset or assets. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. ”

http://www.investopedia.com/terms/d/derivative.asp

Yes, a derivative is labeled as secured but is fundamentally not the case, thereby requiring a process of clearing.

derivatices clearinghouse

“… a clearing requirement and an exchange-trading requirement are NOT the same thing. They are very, very different. It is extremely important that people understand the difference between mandatory clearing and mandatory exchange-trading, because there’s an incredible amount of confusion about this in the press — even journalists who cover financial reform constantly conflate clearing and exchange-trading.

A clearing requirement is a requirement that all eligible derivatives be cleared on a central clearinghouse (also known as a central counterparty, or CCP). A clearinghouse provides critical counterparty risk mitigation by mutualizing the losses from a clearing member’s failure, netting clearing members’ trades out every day, and requiring that parties post collateral every day. Clearinghouses also centralize trade reporting, and can provide any level of post-trade transparency to the OTC derivatives markets that your heart desires — same-day trade reporting, including prices, aggregate and counterparty-level position data, etc. Virtually all of the harmful opacity and murkiness of the current OTC derivatives markets can be ended with just a clearing requirement — that is, a clearing requirement is a prerequisite for getting rid of the harmful opacity in OTC derivatives; an exchange-trading requirement is not.

In sum, virtually all of the systemic risk mitigation in derivatives reform — reduced counterparty risk, the huge increase in transparency, the reduced complexity, regulatory access to the necessary data, etc. — comes from the clearing requirement.

An exchange-trading requirement, on the other hand, is simply a requirement that all eligible derivatives use a particular type of trade execution venue: exchanges (also known as “boards of trade”). It is important to remember that an exchange-trading requirement has nothing to do with clearing — they are completely separate issues. People tend to think of exchanges as synonymous with clearinghouses because, at least in the US, the big exchanges own their own “captive clearinghouses,” so most exchange-traded derivatives are also cleared through the exchange’s clearinghouse. But they are two separate functions entirely.

The exchange is just the trade execution venue (think NYSE vs. Nasdaq). The only thing that an exchange-trading requirement adds to the clearing requirement is “pre-trade price transparency.”

http://economicsofcontempt.blogspot.com/2010/04/exchanges-vs-clearinghouses-this-is.html

The derivatives clearinghouse, therefore, is the heart of the whole financial derivatives system.

The problem is that, those who have established the derivatives system in the first place are not really bent on playing fair and square with other players.

They can and they have created trillions of derivatives that are themselves mere derivatives of spurious “securities” that are now flooding the whole Babylonian banking system that is nothing more than the endless shuffling of worthless toilet paper and digital bits.

It is in this context that the supposed regulators are now warning themselves, and everyone else, that a collapse of the whole financial system is imminent. They’re too late to admit that certainly that’s the case all along, but they are now catching up.

In fact, the Lord Rothschild now admits that the whole slew of acrobatics is just one huge experiment, and you’re the lab rat.

BIS, Financial Stability Board, Warn Derivatives Clearinghouse Failures Could Bring Down International Financial System

Aug. 16, 2016 (EIRNS)—The leading institutions of the bankrupt trans-Atlantic financial system issued a report today, warning that there are no mechanisms in place at this time which can prevent a blow-out the $600 trillion-plus global financial derivatives bubble, should any one major party default on derivatives.

Lyndon LaRouche has warned for three decades that derivatives, inherently fictitious, must simply be written off, a measure which can be safely and effectively carried out under a restored Glass-Steagall regime. But Wall Street and City of London wizards insisted they had everything under control; that the danger of an uncontrollable chain of derivatives defaults such as that which blew out the global system in 2007-2008, had been resolved by centralizing derivatives trading in a few “clearing houses,” which would be responsible for ensuring that derivative trades would be covered, in the case of defaults.

The Bank for International Settlements’ Committee on Payments and Market Infrastructures and the International Organization of Securities Commissions (IOSCO)—representing between them the world’s central banks and securities regulators — prepared the report, which admits that the CCPs (as the clearing houses are called), which are supposed to be the risk managers and guarantors for derivatives contracts, have no means to do so, and that the CCPs themselves have become a threat to the system.

The Financial Times of London put it this way:

“Four years after guidelines were introduced, a survey of 10 derivatives clearing houses found that some did not have sufficient policies or procedures to ensure they had enough money to keep going, or to replenish diminished reserves. Others needed to improve their stress tests, the report said.”

The Wall Street Journal summarized the content of the BIS/IOSCO report: “Clearinghouses still have shortcomings in their risk-management and recovery practices, which could have marketwide ramifications in the case of default.”

Business Insider, at least, had the guts to admit that the results of that survey “are slightly terrifying,” because if the clearing houses don’t work, derivatives are “just unexploded nuclear bombs nestling deep in the financial system.”

The International Swaps and Derivatives Association sent an email to Business Insider acknowledging in its understated way, that

“several clearing houses have become systemically important as a result of global clearing mandates, and it’s vital this infrastructure is as secure as possible, which means establishing a credible and robust recovery and resolution framework.”

In turn, the Financial Stability Board (FSB), established in 2009 by the G20 Finance Ministers for the express task of overseeing “prudent” handling of the global financial system, and headed by the Bank of England’s Mark Carney, today issued a note

“calling for public comment from the industry [sic] to help develop resolution strategies and plans for winding down CCPs in the case of a global financial shock. Respondents have until Oct. 17 to reply to questions set out by the FSB,”

the Wall Street Journal reported.

The WSJ coverage implies that the report was prepared on the insistence of China, the current head of the G20, which has placed the safety of central clearing houses “high on the agenda” of the upcoming Sept. 4-5 G20 summit, which China is hosting. When it took over the G20 in December 2015, China immediately revived the G20 International Financial Architecture Committee, forcing discussion of the global system back on the agenda.

http://www.larouchepub.com/pr/2016/160816_bis_warns.html

They’re responsible for the establishment of the whole deliberately complicated, multi-layered financial system that is beyond regulation due to the inherent profit motive in the system. The motivation to profit is proven to be the most corrosive character which eats up the soul of every player participating in the system.

The solution is the complete elimination of the profit oriented financial system in favor of the intelligent management of the planet’s finite resources that should be considered as our common heritage, and the full decentralization of global governance in favor of the economic and full political empowerment of the individual.

We already have the means to make this thing happen. The collective will towards this direction is yet to come.

Aside from the fiat monetary scam and bloodsoaked petrodollar, another significant source of funds for the Nazionist Khazarian Mafia is the “healthcare” industry which registered a whopping $3.09 trillion in 2014, and is projected to soar to $3.57 trillion in 2017, in the US alone. We believe that this is just a conservative figure.

We can avoid using drugs, defeat any viral attack and scaremongering, like the Zika virus, easily by knowing how to build our own comprehensive antiviral system. Find more about how we can kill three birds with one stone, right here.

5 thoughts on “Derivatives Clearinghouse Failures Could Bring Down International Financial System”

  1. HOW……….. MANY………. BANKRUPTCYs……HAVE…….the ………THIEVING……….JOO-WISH………khazars………..INSTITUTED……….across…….MILLENIA……..across …….THE PLANES of EARTH…….across…….FINANCIAL INSTITUTIONS ……..across…… “GOVERNMENTS”……..across…….”CORPORATIONS”……across……NATION STATES ? ? ?

    Quote…….

    “……….they’re responsible for the establishment of the whole deliberately complicated, multi layered financial system that is beyond regulation due to the inherent profit”…… (Imho…..THEFT)……. “motive in the system.

    The motivation to profit”…..(Imho….THEFT)…..”is proven to be the most corrosive character which eats up the SOUL of every PLAYER participating in the system….”

    Imho……..the ….”PLAYERS” …..were “BERTHed”….sans…..SOULS.
    STEALING….is the only GAME they know.

    Quotes ……..

    “August 16 th …..The leading INSTITUTIONS of the BANKRUPT trans-Atlantic system issued a report today warning that there are no mechanisms in place at this time to prevent a blow out of the $600 trillion plus global derivative bubble……..”

    The Wall Street Journal implies …..THE REPORT was PREPARED…..on the …..INSISTENCE …of….CHINA”.

    $$OOOOOh ………… this “ADMISSION” of almost certain…….. BANKRUPTCY of all PARTIES RESPONSIBLE…….has come to light …ONLY BECAUSE……….CHINA INSISTED on EXPOSURE ! $$ £ !

    Lyndon La Rouche………”derivatives must SIMPLY be WRITTEN OFF” !
    Could Lyndon La Rouche be a …..Joo-WISH khazar …enTITy ? ?

    The THIEVING SCUM think THEY can STEAL $600 + TRILLION and just…..WALK AWAY…..with their……..”SWAG” ?

    As a result of the London “riots” a few years ago….YOUNG MEN….were detained/JAILED for STEALING ….TRAINING SHOES…and…..DRINKS.

    And the more mature ….”GENTLEMEN”……Masters of the Universe…….WALL STREET…..CITY of LONDON…..beLIEve……they can …..SWAN off into the SUNSET……with $600 + TRILLION…..on THEIR “TAB” ? ?

    CORRECTION………….

    The Masters of the Universe ….WALL STREET…..CITY of LONDON….think they can ….SWAN off into the SUNSET….with …THEIR SWAG…..and……….THEIR $600 TRILLION ……LIAR-BILL-ity………on the……TAB of the TAX PAYER ? ?

    I DENY CONSENT in perpetuity and retrospectively.

    RETROSPECTIVELY…….I DEMAND REIMBURSEMENT….. of all …PREVIOUS ….JOO-WISH “bailouts”.

    The time is long overdue for us……INDIGENOUS SOVEREIGNS…..of the British Isles…..to ….SERVE …EVICTION ORDERS….on……..

    1) The ….ILLEGAL ALIEN ….TempLIAR SCUM …INFESTING the “City of London………
    and ……..
    2) The …… IMPOSTER “cween”……INFESTING the biggest ….COUNCIL HOUSE in Britain…….Buckingham PaLICE.

    AND…….issue…. COMMERCIAL LIENS…..for the …..REPAYMENT of all…..”stolen monies”…..silver and gold.

  2. YETTA, YETTA, YETTA.

    WHEN THE HOUSE OF SAUD ANNOUNCED ITS INCREASE IN OIL PRODUCTION THE SAME EXPERTS SAID IF OIL DROPPED BELOW $30/BRL IT WOULD SET OFF THE DERIVATIVE MARKET. WELL THE PRICE WENT BELOW $30 AND NOTHING. . . ABSOLUTELY NOTHING HAPPENED.

    THINK ABOUT IT THERE ARE SOMETHING LIKE $500 TR IN DERIVIATIVE CONTRACTS OR SO THEY SAY. THE ENTIRE WORLD GDP IS $78 TR. SO THAT $500 TR MAKES NO SENSE. FURTHERMORE THEY ARE CONTRACTS ON BETS. SO IT’S NOT LIKE WE ARE TALKING REAL MONEY.

    THESE SO CALLED DERIVATIVE CONTRACTS BEGAN TO GROW AS THE PETRO DOLLAR BEGAN TO FAIL. THE FOREX RATE OF ANY CURRENCY IS DETERMINED ON HOW MANY PEOPLE USE IT. WITH FEWER PEOPLE USING PETRO DOLLARS AND THE PRICE OF OIL IN DECLINE THAT WOULD CAUSE THE FOREX RATE OF THE USD TO DECLINE. SO OUT OF THE SEA LIKE A VENUS ON A HALF SHELL THIS DERIVATIVE PROBLEM WAS BORN.

    I BELIEVE IT WAS CHARLES GASPIRANO WHO SAID THAT NO MONEY WAS PUT UP FOR THESE CONTRACTS AND NO MONEY WAS PAID OUT WHEN THE CONTRACTS WERE ACTIVATED. HMMMM? SOUNDS LIKE THAT SANITIZED MONEY THAT MOVED THROUGH THE FOREX MARKETS WHEN THE TREASURY FLOATED BONDS AND SOME UNIDENTIFIED BUYER BOUGHT THEM THROUGH THE CARIBBEAN BANKING CENTER (NOBODY HAS EVER BEEN ABLE TO FIND THAT ADDRESS) AND LATER THROUGH EUROCLEAR. IT IS REFERRED TO AS STERILIZED MONEY, MEANING: THE US PRINTS THE DEBT THEN PRINTS THE MONEY TO BUY BACK THE DEBT. THE TRANSACTION BOOSTS THE FOREX VALUE OF THE USD WITHOUT THE US INCREASING ITS TRADE DEFICITS.

    YOU SHOULD START LOOKING AT THIS DEBT AS COUNTERFEITING. YOU PRINT $100 WORTH OF $10 BILLS IN YOUR BASEMENT. THOSE BILLS AREN’T WORTH ANYTHING UNTIL YOU PUT THEM IN THE MARKET PLACE. SO YOU BUY A $100 PAIR OF SNEAKERS WITH YOUR COUNTERFEIT MONEY. THEN YOU RETURN THE SNEAKERS BECAUSE THEY’RE UNCOMFORTABLE. AND THE SALESCLERK GIVE YOU BACK TEN AUTHENTIC BILLS. NOW YOU HAVE $100 THAT IS REALLY WORTH $100. THAT IS WHAT WAS DONE IN 2008 WITH THOSE OUTRAGEOUS MORTGAGES THAT NO ONE WANTED INVESTIGATE. AND THAT FRAUD HAS BEEN REPEATE WITH THE OTHER BAILOUTS THAT HAVE FOLLOWED. I BET YOU THE ENITRE FRAUD COMMITTED AS OF 2008 IN REAL TERMS IS PROBABLY NOT REALLY WORTH MORE THAN HALF-A-BILLION DOLLARS.

We do appreciate sensible comments...

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s