Loading ...“Lethal For Bullion Banks” – The Looming $600 Trillion Derivatives Crisis
The liquidity pressures that result from banks trying to reduce their balance sheets also affects other derivative markets, and from our discourse on Deutsche Bank’s balance sheet, we can see that the whole banking system is in a very precarious position with respect to derivatives.
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While we survived the Lehman crisis with only one investment bank failing, the collapse of industrial production of goods and services due to lockdowns to control the spread of the coronavirus will almost certainly lead to multiple bank failures. Bankers are staring into an abyss.
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For central banks, monetary inflation is everywhere the solution. Bank rescues, payment chain failures, the furloughing of millions of employees, helicopter money to bail out whole populations, money to bail out governments, money to support all categories of financial assets: the list is endless in scope and infinite in quantity. The survival of the global financial system is at stake. If it survives, state-issued money will have been destroyed. But then what is the point of owning financial assets valued in valueless currency?
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While this process of monetary destruction would have reasonably been expected to evolve over time, the coronavirus has accelerated it. The fate of the $640 trillion derivative mountain recorded by the Bank for International Settlements is sealed and will be settled through bank bankruptcies and state-directed elimination. In observing the train wreck that is precious metal derivative markets, we are at Act 1 Scene 1 of a rapidly-evolving and dramatic derivatives tragedy.
https://www.zerohedge.com/markets/lethal-bullion-banks-looming-600-trillion-derivatives-crisis