Today on The Janssen Report (#88): the financialization of pretty much everything has caused incredible systemic risk on top of so-called collateral. In fact, this collateral is the true value upon which most derivatives are based, such as gold, silver, oil and real estate.

It turns out that even the biggest financial experts do not truly understand derivatives. It’s a large “unknown”. Just recall Warren Buffett’s letter to shareholders about his failure to unwind the derivatives portfolio of one of his newly acquired companies in the late 90s. He called derivatives a potentially lethal time bomb.

Estimates concerning the volume of the derivatives market range from 700 Trillion dollars to upwards of 1.5 Quadrillion dollars (including what is sometimes referred to as shadow derivatives).
Let’s look at the sheer size of the numbers alone:
700 Trillion     =   700,000,000,000,000
1.5 Quadrillion = 1,500,000,000,000,000

The size of the economy is at about 70 to 75 Trillion dollars (annual World GDP):
75 Trillion     =         75,000,000,000,000

All it takes is one domino to bring down this house of cards (or inverted pyramid) and create a vortex that will suck all the value out of this scheme.

Imagine the epic blow to financial institutions around the globe if their balance sheets start to vaporize.
And then imagine what this will do to your personal financial situation.

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Sources:

• Treasury Statement November 26, 2014
• China’s gold
• Charles Hugh Smith (OfTwoMinds.com) on The Oil-Drenched Black Swan (3 parts):
  • http://www.oftwominds.com/blogdec14/oil-black-swan12-14.html
  • http://www.oftwominds.com/blogdec14/financialized-oil12-14.html
  • http://www.oftwominds.com/blogdec14/oil-risk12-14.html
• “Official” statistics on total value of outstanding derivatives, source BIS Bank
• Derivatives risk and Warren Buffett
• Gross World Product (global domestic product)
• Even Forbes.com on financial (derivatives) meltdown

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Cheers!

Marco Janssen