# Are banks hiding profits off balance sheet?



## miller (Nov 19, 2010)

They claim there are $680 trillion of derivatives off balance sheets.  Why is even $1 off the balance sheet?  

There is never a peep about $680 trillion.  Will there ever be an amount that creates a story?  What does $680 trillion relate to?  Are Americans too stupid to question this or are they brainwashed zombies who have been rendered thoughtless by the daily propaganda avalanche?

Can anyone be this stupid?  Its hard to believe.


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## uscitizen (Nov 19, 2010)

Not really hard to believe.  this is the kinds of stuff that led to our downfall and no regulations have been implemented to prevent it from happening again.


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## boedicca (Nov 19, 2010)

I'd appreciate a source link for this claim.  It is highly unbelievable.

I doubt that  banks have $680 TRILLION of off balance sheet assets.

Bank of America, one of the world's largest banks, has only $2.2 Trillion in total assets.  For the $680 Trillion figure to be real, one would have to assume that the banking system has more off-balance sheet assets than it does on balance sheet.

Or, the derivatives are not assets, they are liabilities - this aspect is somewhat horrifyingly plausible.

In either case, derivatives are not profits.


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## Toro (Nov 19, 2010)

The banks were behind 9/11. Especially the Jewish banks. And of course, the Fed.


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## miller (Nov 19, 2010)

If you quit watching Glenn Beck and start watching Congressional hearings you will learn there are $680 trillion of derivatives off balance sheets of the banks.

I've traded derivatives for 41 years but you folks know more about derivatives than I do.

I also wrote a book titled JUST CAUSE JUST FACTS.  You can read excerpts on Amazon.  

Buy the book, I need the money.  Its about a derivative case in Federal criminal court.

It doesn't matter what you believe or want to believe.  It matters what really happened.

America is in the shit house big time.

 You people keep electing the Democrat Republican Crime Family.  Its your fault.  Take a look in the mirror so you can see who screwed up America.


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## boedicca (Nov 19, 2010)

I found the source of the $680 Trillion figure, and the OP has completely misrepresented the statistic.

Quelle Surprise.

_At the time, the derivatives market was relatively small. But it soon exploded, and* the face value of all derivatives contracts across the world &#8212; a measure that counts the value of a derivative&#8217;s underlying assets &#8212; outstanding at the end of last year totaled more than $680 trillion, according to the Bank for International Settlements in Switzerland. *The market for credit-default swaps &#8212; a form of insurance that protects debtholders against default &#8212; stood around $38 trillion, according to the international swaps group. That represents the total amount of insurance that has been written on various kinds of debt, but the amount that would have to be paid out if the debt went into default is considerably less. _

http://www.nytimes.com/2009/05/14/business/14regs.html?_r=1


And note, that the EVUL Credit Default Swaps were slightly more than 5% of the total global market.

The global derivatives markets include future and options often used by companies to lock down supply costs - i.e. fuel futures for airlines, pork futures for meat processors etc.   Speculation is only a part of the market - but the Big Government Types want to destroy the effectiveness of derivatives for anyone because a fraction of the market turned toxic.

Furthermore, market mechanisms in an of themselves are dealing with CDS.  They peaked in 2008 at $62 T, dipped to $38 T in 2009, and are most likely even lower this year.

_CDSs -- now a $38 trillion market that peaked in 2008 at $62 trillion -- are now so dangerous because Gramm's legislation made it possible for the same bond to be insured hundreds of times without requiring each insurer to maintain reserves in case of a claim or to report their contracts to anyone. Last September, a credit downgrade of AIG triggered a $14.5 billion margin call related to the CDSs on the books of AIG's financial products group. Since it couldn't pay, the U.S. bailed AIG out to the tune of $173 billion. Such margin calls also led to the collapse of Lehman Brothers, Fannie Mae, and Freddie Mac._

http://www.dailyfinance.com/story/i...t-phil-gramms-mistake-on-derivatives/1545826/


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## miller (Nov 19, 2010)

The privileged class will gladly starve and screw the entire country. The right wingers fantasize being invited into the privileged class while the progressives whine and whimper.

The bankers make my point best. They get to gamble with the depositors cash on derivatives. They embezzle bonuses when they win and when they lose. The privileged class never admits their crazy mistakes. They just claim theyre too complicated for anybody else to understand.

Its the complexity defense.

There is an easy solution.


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## miller (Nov 19, 2010)

This is a pure lie.

"Derivatives are hard to value. They are virtually hidden from investors, analysts and regulators, even though they are one of Wall Streets biggest profit engines. They do not trade openly on public exchanges, and financial services firms disclose few details about them. The new rules are meant to change most, but not all, of that opacity."

This is a false claim.  The NYT reporter who wrote this is ignorant.  I began trading futures and option in 1969 to survive the stock market crash while I worked for 
EF Hutton.  If they are, "one of Wall Street's biggest profit engines" why are they off the balance sheet?  Are they hiding the profits from the IRS?

I wrote a book about an actual derivatives criminal case in Federal Court.  The title is 
JUST CAUSE JUST FACTS.

You can read excerpts of the story on Amazon.  It is a fascinating, entertaining story that will give you a real incite into our corrupt judicial branch, my 9 years in Federal prison along with many encounters with real mob guys including Gene Gotti, Joe Gambino and many others.  

The story reveals my background as a broker and trader of derivatives for 41 years.


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## iamwhatiseem (Nov 19, 2010)

Just goes to show you, you can never stop learning in this life.
And today - I learned that I was wrong about the last person I thought was the stupidest human on the planet. There is someone even dumber.


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## KissMy (Nov 19, 2010)

*Does the term "Shadow Banking System" ring a bell???*


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## Toro (Nov 19, 2010)

miller said:


> You can read excerpts of the story on Amazon.  It is a fascinating, entertaining story that will give you a real incite into our corrupt judicial branch, my 9 years in Federal prison along with many encounters with real mob guys including Gene Gotti, Joe Gambino and many others.
> 
> The story reveals my background as a broker and trader of derivatives for 41 years.



Really?  That's kinda interesting.  What were you in the clink for?

Extortion?

[ame]http://www.amazon.com/Just-Cause-Facts-Government-Corruption/dp/1419609068/ref=sr_1_1?ie=UTF8&qid=1290223356&sr=8-1#reader_1419609068[/ame]


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## william the wie (Nov 19, 2010)

Toro said:


> The banks were behind 9/11. Especially the Jewish banks. And of course, the Fed.


Giant fail it was opus dei, the masons and the illuminati.


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## Toro (Nov 19, 2010)

william the wie said:


> Toro said:
> 
> 
> > The banks were behind 9/11. Especially the Jewish banks. And of course, the Fed.
> ...



No, no, no.  I'm a member of The Illuminati.  We weren't involved.


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## iamwhatiseem (Nov 19, 2010)

Toro said:


> william the wie said:
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> > Toro said:
> ...



Hey what the...I am a mason...it wasn't us either..it was them damn fake masons...yeah those nights of columbus.


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## william the wie (Nov 19, 2010)

iamwhatiseem said:


> Toro said:
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> > william the wie said:
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I don't believe either of you.


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## iamwhatiseem (Nov 19, 2010)

william the wie said:


> iamwhatiseem said:
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> > Toro said:
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uh-huh...ya see...obviously one of the knights of columbus right here...sneaky bastards.


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## CrusaderFrank (Nov 19, 2010)

They're hiding the fact that the $680 Trillion is only worth 70 cents on the dollar, if that


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## william the wie (Nov 19, 2010)

CrusaderFrank said:


> They're hiding the fact that the $680 Trillion is only worth 70 cents on the dollar, if that


Actually it is about sextuple counting or worse.


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## KissMy (Nov 20, 2010)

[ame="http://www.youtube.com/watch?v=v3rfgkTAlho"]"Shadow Banking System"[/ame]
[ame="http://www.youtube.com/watch?v=_mq1Nh1hIXk&feature=related"]Shadow banking: still big, still dangerous[/ame]


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## william the wie (Nov 20, 2010)

Good video but dated. TALF mentioned in the first video sank relatively quickly so the data comes from the first half of 2009. Tax law changes in Europe and the Far East are constantly changing the nature of the shadow banking system so I suspect that some of the simplification was deliberate and necessary. For example the collapse of monoline bond insurance companies due to undercapitalization in mid 2008 was the proximate reason for the collapse or near collapse of all investment banks on Wall St. in Oct. 2008. Merril Lynch, Citigroup  and Lehman Brothers all had a large fraction of their hedges collapse in a matter of months. forcing huge writedowns. Likewise Berkshire Hathaway had one of its better recent years bailing out Goldman Sachs. Yet the idea that Berkshire Hathaway is an insurance company/industrial bank still strikes people as odd since regulated industrial banks do not exist in the US. And each of those layers of shadow banking matters.


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## miller (Nov 20, 2010)

$16 trillion 

$680 trillion

What happened to the other $644 trillion?  I listened to the shadow bank man for 2 minutes.  That's all I could take.


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## KissMy (Nov 20, 2010)

miller said:


> $16 trillion
> 
> $680 trillion
> 
> What happened to the other $644 trillion?  I listened to the shadow bank man for 2 minutes.  That's all I could take.



These derivatives are on the books of the "Bank for International Settlements." Today they total $632.6 Trillion. You can see the totals here under the counter labeled "Currency & Credit Derivatives"


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## editec (Nov 20, 2010)

> At the time, the derivatives market was relatively small. But it soon exploded, and the face value of all derivatives contracts across the world &#8212; a measure that counts the value of a derivative&#8217;s *underlying assets* &#8212; outstanding at the end of last year totaled more than $680 trillion, according to the Bank for International Settlements in Switzerland. The market for *credit-default swaps &#8212; a form of insurance that protects debtholders against default &#8212; stood around $38 trillion*, according to the international swaps group. That represents the total amount of insurance that has been written on various kinds of debt, but the amount that would have to be paid out if the debt went into default is considerably less.


 
Note that the ASSETS might be worth that staggering sum, but the credit default swaps involving those assets are significantly lower?

These sums are so staggergly huge that the eyes glaze over and most of us dismiss them as impossible.

The US GDP is only about $14 trillion, isn't it?

So I presume that the $680 Trillion number must pretty much be (if not entirely vapor) the combined amount of all debt (long and short) that exists in the world.

Now I am NOT a derivativestrader, know next to nothing about the business, either.

But the sheer size of this claim* puts the onus on the claimant* to make sense of it for us.

Telling us to READ MY BOOK, isn't likely to give your claim much credibility.

Would you be so kind as to give us a thumbnail description of how such a huge amount of debt becomes a hidden asset the banks are keeping off the books?

Because otherwise, really, how can any of us comment on information that ONLY YOU seem to have?


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## Toro (Nov 20, 2010)

There's a difference between notional and net exposure.  Today's notional exposure is about $640 trillion.  Net exposure, depending on you ask, is $2-$10 trillion.  Notional is if you add everything up.  Net is when you offset each position.  Almost all derivatives are offset, i.e. the value goes up for one investor and down for another.  In theory, the real exposure is the net exposure.  But that assumes no counterparty risk, a fanciful assumption.  The other side of the counterparty if there is a failure is the government because they will bail out the market.

Also, most of the derivatives market is interest rate and currency swaps, which last I heard, accounted for three-quarters of the entire market.  These are plain vanilla swaps, and, for the most part, are about as scary as the squirrel in the tree.  However, that leaves ~$160 trillion notional in other derivatives, which is still a big number, considering that the GDP of the planet is ~$150 trillion.


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## miller (Nov 20, 2010)

Notional is a $100,000 Treasury bond contract.

The price just dropped from 134 to 126.  That's an $8000 loss.  If its a hedge (short) against a $100,000 bond its a wash.  There are 450,000 trades per day.  On the 10 yr note there are 1,000,000 contracts traded each day.  When banks buy Treasury futures they are speculating with the depositors money.  Is that different than going to a casino?

I want the wizards to explain why the market skyrocketed in August.  Have you heard about the law of supply and demand?  Was it repealed?


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## miller (Nov 20, 2010)

I have no idea and neither does anyone else because its all secret and off the balance sheet.

The fact that none of the banks deny it makes me assume that the $680 trillion is close to reality.  I suspect that when any derivative contract is created that the buyer and seller both know the actual amount, don't you?

Are we a nation of imbeciles?  Shouldn't the Congress and President be told to investigate?  There shouldn't be $1 off the balance sheet.  There is no legitimate reason to allow any bank funds to be off their balance sheets.

Did you miss the mortgage meltdown?  Did you miss the TARP bail out?

I wrote my book to expose reality.  If you want to learn buy JUST CAUSE JUST FACTS.


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## miller (Nov 20, 2010)

I worked hard for 5 years writing my book.  My purpose was to enlighten our entire country.

I had an experience none of you ever had.  I spent 9 years in Federal prison.  It took me 20 months to be allowed a trial because the case was set up by me to expose the government and media.  They didn't want to be exposed.

No literary agent would represent me and I was forced to self publish the book.  It costs me $4.74 per copy.  I'm not going to give it away.  You can buy it on Amazon.  I'm not Mark Twain but I can write OK.  I included verbatim transcribed dialogue for 2 reasons.  I wanted 100% accuracy and the dialogue was better than any fiction writer could write.

I also wanted the reader to be entertained.  It isn't a dry story about derivatives.  Its about money and spectacular corruption.  I added mob and prison experiences for entertainment.  There's a big market for mob stories.  One event was about the kidnapping of Judge Nevas.


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## william the wie (Nov 20, 2010)

The US should set up a transit clearance bill.


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## miller (Dec 7, 2010)

Every single fact cited by TORO is a mistake.

If you want to see the real amounts go to the CME website.

Toro claims there are $640 trillion notional value and the risk of loss is $2 to $10 trillion.  That would only be 1.56% if you use $10 trillion.  In fact the US Bond contract alone just dropped fro 135 to 124.  On a $100,000 bond contract that's an $11,000 loss or 11%.

Toro bought the Wall Street bullshit and is now peddling that compared to the actual facts.  No one has any clue what could possibly be in the $640 trillion off balance sheet deriviatives.  That's a secret they won't reveal.  But no one is denying it.  No one being the banks' executives or the accounting firms who audit.  The accounting firms are not about to give up their fees to protect the UNITED STATES of  ASSHOLES.

This forum is populated by ignorant, gullible, brainwashed fools.  Then there are the other 17,000 people who never reply.  Why are they wasting their time here?


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## Toro (Dec 7, 2010)

miller said:


> Every single fact cited by TORO is a mistake.
> 
> If you want to see the real amounts go to the CME website.
> 
> ...



Dude

You might want to try a new marketing campaign.  Insulting people isn't a good way to sell them.


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## miller (Dec 7, 2010)

America is sinking fast.

Do you want to remain in fantasy land and keep screwing yourselves?  I wouldn't mind but you're sinking the same ship I'm on.  To grasp why read this: Screwed Again: Just Cause Just Facts synopsis


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## The Outsider (Dec 8, 2010)

America is sinking fast.

 That is why I am going to twist this thread by trying to promote my book which could be yours for just 7 easy payments of $99.99. The phones are ringing and a friendly salesman will take your call.

I am Stephan A. Miller and I approve this message.


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## KissMy (Dec 8, 2010)

KissMy said:


> These derivatives are on the books of the "Bank for International Settlements." Today they total $632.6 Trillion. You can see the totals here under the counter labeled "Currency & Credit Derivatives"



*Something is really screwed up.* On 11-20-2010 at 05:20 AM I posted the above quote with the link to the debt clock that showed the "Bank for International Settlements" showed $632.6 Trillion in "Currency & Credit Derivatives". Today it only shows $577.4 Trillion. *What happened to the $55.2 Trillion of Currency & Credit Derivatives that disappeared?* Did these expire, go bad or did the reserve banks monetize them?

A couple of years ago this "Currency & Credit Derivatives" number was around $750 Trillion.


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## william the wie (Dec 8, 2010)

KissMy said:


> KissMy said:
> 
> 
> > These derivatives are on the books of the "Bank for International Settlements." Today they total $632.6 Trillion. You can see the totals here under the counter labeled "Currency & Credit Derivatives"
> ...


200+T in defaults triggered CDS closure?


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## KissMy (Dec 8, 2010)

william the wie said:


> KissMy said:
> 
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> > KissMy said:
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Who was on the loosing side of those defaults?


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## william the wie (Dec 8, 2010)

The CDS issuers were unless they can demonstrate fraudulent covenants. One of the scary aspects of the putback lawsuits is that Treasury, HUD and the Fed plus the various agencies can spawn a chain of multiple derivatives that are in effect counted twice such that 10 T in actual problem loans can in fact generate 100 T in derivatives where only 3-4 T actually changes hands. Loans originated by say Countrywide, securitized by Merril Lynch, guaranteed by Fanny or Freddi, sold to to Societe General and then sold in smaller lots to European bond funds should generate 12-20 derivative dollars per dollar at risk. Currency Swaps, CDSs on currency, loans and guarantees plus agency and service fees across the food chain create a huge derivative multiplier. In the case of your example total derivatives exceed global traded debt by at least 10 times add in the usual 10-20% haircut plus residual value (net foreclosure receipts and good loans within the tranche) - collection and legal costs total losses apportioned out should equal 1-5% of total derivative resolution.

Another factor is the ECB rules on new derivative issuance. That I do not understand nor will I comment on it.


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## loosecannon (Dec 9, 2010)

Currency derivatives tend to be very short term. For obvious reasons. Esp in tumultuous times. And Credit derivatives include CDS. I doubt many players are as eager to buy shares of one another's default potentials as they were in years past. This is probably a good thing.


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## Sheldon (Dec 9, 2010)

miller said:


> Buy the book, I need the money.





Well at least you're blunt about your purposes here.


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## Ropey (Dec 9, 2010)

loosecannon said:


> I doubt many players are as eager to buy shares of one another's default potentials as they were in years past. This is probably a good thing.



No probably to my view. I'm not going anywhere near such practices.  They were only as good as the false evaluations.

There's still a lot of venues to generate income though, however I have changed my investment portfolio almost completely.


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## miller (Dec 10, 2010)

I'm a capitalist and worked 5 years to write the book.  We Americans like capitalism.  I wrote the book to expose corruption no one on this forum ever heard about because it was covered up.  More than $90,000,000,000 which back in 1987 to 1996 was a ton of money.

Its a fantastic Xmas present and then you and all your friends can grasp the class war we can easily win if we can all pop out of the brainwashed trance the under class is in.

Its absolutely critical to just consider you might be brainwashed.  Then you will be able to grasp that the privileged class are about a few million crooks who steal Americans jobs and exploit slaves in China to transfer our wealth to them by out right theft and bribery.  

The longer you people fail to address the brainwashing trance, the longer we'll have more poverty.  We must elect a legit government to prosecute the privileged crooks in banking, and other industries.

Click here to buy the book
Screwed Again


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## miller (Dec 10, 2010)

The best Xmas present all your friends can get would be a copy of my book.  You will learn how we Americans are being taken down by the small privileged class.  

When you keep reelecting crooks who kickback for their bribes with complete immunity.  Outright theft is protected by law enforcement. and the courts.

We must start working together to use the internet to vote these crooks out.  Quit turning your heads.  The place to start is 911.


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## KissMy (Dec 10, 2010)

miller - After reading your website it looks like your book is behind the curve. There was no mention of federal, state & local unfunded pension guarantees. Unions, governments & wall-street have promised these huge tax payer guaranteed unfunded pensions to government workers. Wall-street bankers raided these funds with phony AAA paper & government over promised & under funded them. Now the US citizens pockets will get picket to pay for this.


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## Ropey (Dec 10, 2010)

KissMy said:


> miller - After reading your website it looks like your book is behind the curve. There was no mention of federal, state & local unfunded pension guarantees. Unions, governments & wall-street have promised these huge tax payer guaranteed unfunded pensions to government workers. Wall-street bankers raided these funds with phony AAA paper & government over promised & under funded them. Now the US citizens pockets will get picket to pay for this.



You went there?  Gotta bump you for that.


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## miller (Feb 21, 2011)

Sheldon said:


> miller said:
> 
> 
> > Buy the book, I need the money.
> ...



No one bought the book and I took the link off my blog.


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## miller (Feb 21, 2011)

Sheldon said:


> miller said:
> 
> 
> > Buy the book, I need the money.
> ...



I'm blunt about everything.  I don't fool myself.  Try some reality.


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## manifold (Feb 21, 2011)

Profits for any given are reported on an income statement.  The balance sheet is a snap shot of a point in time (that may include some profit for period cumulative total broken out from total retained earnings) .  However, the idea that "profits" can be hidden off balance sheet betrays a fundamental ignorance of basic accounting concepts.


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## miller (Feb 21, 2011)

To get to $680 trillion means there's no limit.  Its infinite.  Its zooming past galaxies.  

When there was $1 trillion in foreign debt, the US Brady Plan buried it.  The US got tired of hearing about countries that missed their payments.

Whatever has grown to $680 trillion is like a rocket that goes faster than twice the speed of light.  Its bizarre and now you can go back to your trance and forget about it.  

It ain't off the balance sheet because its good.

I had to use blue for this one.  I was afraid you wouldn't see it.


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## miller (Feb 21, 2011)

Toro said:


> There's a difference between notional and net exposure.  Today's notional exposure is about $640 trillion.  Net exposure, depending on you ask, is $2-$10 trillion.  Notional is if you add everything up.  Net is when you offset each position.  Almost all derivatives are offset, i.e. the value goes up for one investor and down for another.  In theory, the real exposure is the net exposure.  But that assumes no counterparty risk, a fanciful assumption.  The other side of the counterparty if there is a failure is the government because they will bail out the market.
> 
> Also, most of the derivatives market is interest rate and currency swaps, which last I heard, accounted for three-quarters of the entire market.  These are plain vanilla swaps, and, for the most part, are about as scary as the squirrel in the tree.  However, that leaves ~$160 trillion notional in other derivatives, which is still a big number, considering that the GDP of the planet is ~$150 trillion.



More nonsense.  The only thing you're right about is that the $680 trillion is notional.
1% of $680 trillion $6.8 trillion.  Nothing moves only 1%.  Exposure on Treasuries as an example just dropped $16,000 on a $100,000 bond since September, 6 months ago.

That's 16%.  16% of $680 trillion is $108 trillion.  Cut that in half to $54 trillion.  Feel better?  You're still in fantasy land.


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