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BIS valuation of world's derivatives back in 2002 was about $100 trillion

*

BIS 2007 valuation of the world's derivatives is now a whopping $516 trillion

 

= =

 

I think it is the worst sort of deception to pump out figures like that, without explaining something.

 

These derivatives figures include loads of double, triple, and even ten-fold counting,

because of the nature of Over-the-counter markets.

 

To explain what I mean in a few words, those figures count footprints, as well as the positions

that people are actually standing in.

 

If you want a longer explanation, ask and if I have time, I will give one ... again

 

To be fair, that article does make this point:

 

Moreover, the folks at BIS tell me their estimate of $516 trillion only includes "transactions in which a major private dealer (bank) is involved on at least one side of the transaction," but doesn't include private deals between two "non-reporting entities." They did, however, add that their reporting central banks estimate that the coverage of the survey is around 95% on average.

 

Also, keep in mind that while the $516 trillion "notional" value (maximum in case of a meltdown) of the deals is a good measure of the market's size, the 2007 BIS study notes that the $11 trillion "gross market values provides a more accurate measure of the scale of financial risk transfer taking place in derivatives markets."

 

Along with the more amusing part:

 

Recently Pimco's bond fund king Bill Gross said "What we are witnessing is essentially the breakdown of our modern-day banking system, a complex of leveraged lending so hard to understand that Federal Reserve Chairman Ben Bernanke required a face-to-face refresher course from hedge fund managers in mid-August." In short, not only Warren Buffett, but Bond King Bill Gross, our Fed Chairman Ben Bernanke, the Treasury Secretary Henry Paulson and the rest of America's leaders can't "figure out" the world's $516 trillion derivatives.
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Latest post from Brendon on HPC in the dead gold thread. The realization has set in that no one is using the old thread.

 

Hello all.

 

I certainly hope it hasn't died as I read it regularly to help gauge sentiment on my gold investments. I was quite surprised to see the general reaction of the posters to our actions to be honest. I know that a lot of complaints have been leveled against the moderation and some of the decisions we make on the forum but as someone not involved in the day to day moderation with an outside perspective I honestly believe that the moderators make good decisions in what is quite a tough environment for moderation.

 

There are a number of people who make quite frankly a huge effort to spam and promote their own interests on the forum without adding any kind of contribution to HPC of any worth and when we have to deal with that kind of thing every day in a fair way it is more difficult to assign resource to more important decisions like this.

 

I hope that those people I'm talking about, many of whom have multiple aliases and obviously far too much time on their hands will stop trying to ruin things for everyone else.

 

People come to HPC to read informed commentary on a huge range of issues and whilst I would prefer we had absolutely no moderation the forum is a highly contentious place as evidenced by the 27 solicitors letters I have received this year so far. Such is our commitment to open debate and free speech it is not uncommon for us to put our own companies funds at risk to defend posts which have been challenged without a proper legal basis often by very large corporations.

 

When we bought the web site we did it because we really liked it, it's not a huge money spinner for us and like everyone in the community who supports HPC we want to see it grow in popularity because it is such a unique place where we have learned so much and continue to learn every day because of the vibrancy of the community.

 

Over the course of the next few months we hope to make some changes that have been held back by our other work load to the forum which should build on the success of the site so far and take it to the next level.

 

I do hope we can count on the support of all the current and future members as we work on this and we will certainly put our ideas out for consultation before we implement them because we do care what you think.

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Yes I saw that - I am back to lurking there every now and then just to spot this sort of thing. I doubt I will ever post there again. What I like about the whole mess that they got themselves into is this.... Nowhere on GEI or GHPC can I see a post which says - "nobody post to the gold thread even if they reopen it" it was as if it never needed saying! Everyone is just leaving it well alone! The sad thing is, Brendan is totally missing the point AGAIN! Personally I wouldn't have really minded the gold thread being kept in "metals", neither would I have minded it not being pinned. I think if we are honest we all could have lived with it and probably would have eventually stopped moaning about it and turned it into a bit of a long running joke. But what I will not tolerate, is having perfectly resonable posts deleted by a few jumped up mods. - and for what reason - they dont like being the butt of a joke. Very sad indeed. I hope you are reading this Brendan. You come accross as a good bloke, and I respect your decision to support your mods, but the truth is, nobody feels they can post messages like this on your site because as we all know.......

Your Mods will censor them.

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I just added this reply to Brendons comment. I doubt it will get posted though.

 

 

 

I came to HPC as I suspected that house prices would crash. I became interested in gold only recently.

 

The issue of moving the thread was discussed before and it was known to be provocative. Everyone knew that. It was a deliberate act of vandalism as the consequences of this action were known. Its too late to make excuses as the damage has been done. The gold thread was the heart of the forum where many issues were discussed and it formed a hub to new posts in the main forum. Arguably, Gold backed currency is at the heart of the debate that the website if founded on, which the moderator in question has almost destroyed on HPC.co.uk

 

Sometimes its best to do the right thing even if its a bitter pill to swallow. Restore the gold thread and offer a sincere apology to those that were offended by the moderator in question.

 

Restricting freedom of speech just because you don't like its message will hardly inspire debate in a forum. This is much more of an issue than the gold thread location.

 

Prove me wrong and post my comment.

 

edit: Seems I can post again now. I wonder if it will get deleted. If it doesn't it will restore my faith in hpc website somewhat.

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Latest post from Brendon on HPC in the dead gold thread. The realization has set in that no one is using the old thread.

 

Hello all.

 

...

 

I do hope we can count on the support of all the current and future members as we work on this and we will certainly put our ideas out for consultation before we implement them because we do care what you think.

 

 

Short version - 'Look at our Alexa rating ohmigodohmigodohmigod....'

 

He sounds like Blair - 'I can do whatever I like as long as I say I believe it is right'. Looks like my tumbleweed pic was prescient, and I doubt if any of those 27 solicitors letters were to do with a discussion of the price of Gold.

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Ah azazel - i see you have posted almost excactly what I have said on the gold thread itself! - lets see how long it stays there before it gets deleted.

 

yes it will restore my faith in hpc if it doesn't get removed. I could have edited it to include a link here but I decided not to as that would be understandable grounds on which to remove it.

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When we (me, goldfinger and Pluto) stated our unhappiness with the gold thread being constantly moved, we had our posts deleted immediately, our PM boxes were disabled and we’re treated extremely poorly. At no point were we rude in anyway.

 

I still have posting rights disabled. This is how their moderators work on there.

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I'll have a go for you if you like, using my [poor] memory of one of your old podcasts

A derivitive may be repackaged and sold on many times [say 10 times], just like "pass the parcel"?

BIS valuations count all 10 of those transactions when it should just be the last, as that party is the only one holding the "parcel"?

 

Good summary.

Yes, there are two counterparties to an OTC derivates trades, and when it gets sold on to another

counterparty, not all the risk is extinguished. The counterparty credit risk remains, and so it "stays

on the books" of both parties, although the core other risks in the trade may have been passed on.

 

If you buy and resell a trade security, the risk is gone.

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This has to be the "best" article I have read in the mainstream media, showing how serious the situation is.

 

http://www.telegraph.co.uk/money/main.jhtm...12/cnfed112.xml

 

Fed takes boldest action since the Depression to rescue US mortgage industry

 

"Bernard Connolly, global strategist at Banque AIG, said the Fed action may help calm the markets for now, but it cannot solve the root problem of eroded bank capital."

 

EXCERPTS

"The market was starting to question the solvency of bodies that stand at the top of the credit pile. These agencies together wrap or insure $6 trillion of mortgages. They cannot be allowed to fail because it would cause a financial disaster. The fact that this sector has blown up has caught everybody's attention in Washington," he said.

 

The Fed action set off a powerful relief rally, lifting the Dow Jones index over 340 points in early trading. Both US and European equities have been hovering on key support lines in recent days, threatening to break down through 18-month lows in a second, brutal leg to the bear market.

. . .

It is a ground-breaking move for the Fed to accept mortgage collateral, even if the debt is theoretically 'AAA-grade' debt. The Fed is not allowed to buy mortgage bonds outright, but it can achieve a similar effect by letting banks roll over collateral indefinitely. The European Central Bank is already doing this, shielding Dutch, Spanish, German, and some British banks from the full impact of the credit crunch.

 

The Fed is to create a new facility that allows banks to swap their mortgage bonds for US Treasuries. It is a well-targeted "sterilized" move to avoid adding fuel to inflationary fire. It follows the Fed's separate pledge last Friday to add up to $200bn in liquidity.

 

= =

 

RUSS WINTER's Take on this development: / note: FC="Fictious Capital"*

 

This morning the Fed threw in an expanded version of their prior lending program. It now seems that the window is now wide open for banks and dealers to borrow against more of their mortgage securities, and lots of them. This is not the same as the Fed directly monetizing however.

 

The collateral securities are loosely defined as AAA, a universe that is steadily decreasing. Again, assuming that these institutions wish to borrow, what exactly will they do with the new credit? Because the real or actual market in asset backed securities has been trashed, in theory there may be an opportunity for institutions to play the spreads, borrow cheap with Treasury swaps (borrowing Treasuries), to lend more dear. However, this will only work if the securities purchased are not fictitiously priced. Perhaps at this stage some are, but to me that price clearing of old FC is still a work in progress. If anything, these interventions cloud and distort that and add even more uncertainty to proper securities pricing. More likely, the response to this will be to take securities, borrow against them, and sneak it into the crack up boom pipeline that the Fed seems so oblivious about. As this news is fast breaking, and the market response reactive, I will have more comments later.

 

/more: http://wallstreetexaminer.com/blogs/winter/?p=1476#more-1476

 

= =

 

*WHAT IS "Fictitious Capital"?

Money that is created (temporarily) by financing unsustainable asset values pumped up to artificial

levels by "animal enthusiasms" and a credit bubble.

 

Fictitious Capital can be transformed into real capital by selling the inflated asset, but that simply

passes the inflation valuation on to the buyer. When the value slumps back, it will destroy the

equity, and may also destroy value for lenders who have financed the inflated asset

 

(my own adhoc definition)

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People come to HPC to read informed commentary on a huge range of issues and whilst I would prefer we had absolutely no moderation the forum is a highly contentious place as evidenced by the 27 solicitors letters I have received this year so far.

 

27 solicitors letters?

That does sound like a bit of a problem to me

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A nice chart from cgnao.. I can't post in HPC.co.uk anymore.

 

scxy7.png

 

 

That chart suggests to me that each time an announcement has been made the POG subsequently hits the 50 day MA within 2 weeks.

 

Perhaps we are due a drop to 920-940 in that case?

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I hope you are reading this Brendan. You come accross as a good bloke, and I respect your decision to support your mods, but the truth is, nobody feels they can post messages like this on your site because as we all know.......

Your Mods will censor them.

 

Even I, who was a moderator on two sections of HPC until recently,

found the moderation policies, and reactions of the Mods extreme at times.

Since that experience, I have posted alot less.

 

But the HPC record still shows...

 

#1:

Realistbear

Joined: 4-January 05

Posts: 17,225

Views: 722

 

#2:

DrBubb

Joined: 13-August 04

Posts: 10,464

Views: 594

 

#3:

zzg113

Joined: 18-August 04

Posts: 9,042

Views: 29

 

#4:

Charlie The Tram...

Joined: 28-August 04

Posts: 8,484

Views: 1,242

 

(There are 8 more posters over 6,000, so I expect to be knocked off #2 withing 2008)

 

When I had my little drama (following a spat about a moved Ron Paul poll), I found it strange that the Mods didnt show a little more respect for such a proliferic poster. And I decided if I was feeling that way, maybe some of the complaints were justified. I also thought that maybe I was posting too often- so I cut back. Old #1 poster, zzg113, cut back altogether, and disappeared, as far as I know. Does anyone know what happened to him??

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That chart suggests to me that each time an announcement has been made the POG subsequently hits the 50 day MA within 2 weeks.

 

Perhaps we are due a drop to 920-940 in that case?

 

Not necessarily.

It was closer to the MA in previous episodes. Perhaps it will just drop to support (at a shorter MA,

like 21d or 34d) before taking off again.

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27 solicitors letters?

That does sound like a bit of a problem to me

 

How many letters threatening litigation regarding this website have you had so far this year DrBubb?

 

On topic, I'm surprised that gold is so inactive at the moment. Goldfinger, I'm curious to know what this "powder" is :unsure:

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How many letters threatening litigation regarding this website have you had so far this year DrBubb?

 

Only 25.

 

 

just joking

 

 

none, actually.

But that doesnt mean that I am encouraging such letters.

The friction here is slight. I think my posting reputation on HPC and GHPC tends to frighten off,

some of the more extreme trolls. And perhaps they see GEI as too specialised to even bother.

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Can anyone tell me about the rules for ownership of physical gold and silver (i.e. coins)...

 

If I bought some through GoldMoney or CoinInvestDirect, for example, is there a paper trail that has to be provided to the Government, so they know I'd be owning some gold?

 

Or is there a minimum limit on how much you can buy per year without these records being required (think I read something like 5k per year, but can't remember if that was buying or selling).

 

Wouldn't fancy the idea of being forced to surrender any coins if there was a Government confiscation or something.

 

And if there are rules, does it apply to both gold and silver, or is it just for gold?

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Can anyone tell me about the rules for ownership of physical gold and silver (i.e. coins)...

 

If I bought some through GoldMoney or CoinInvestDirect, for example, is there a paper trail that has to be provided to the Government, so they know I'd be owning some gold?

 

Or is there a minimum limit on how much you can buy per year without these records being required (think I read something like 5k per year, but can't remember if that was buying or selling).

 

Wouldn't fancy the idea of being forced to surrender any coins if there was a Government confiscation or something.

 

And if there are rules, does it apply to both gold and silver, or is it just for gold?

 

Coininvestdirect didn't seem to be to worried about my purchase which was above £5k so as to require passports etc.

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Nice.

I had forgotten that "buy gold" which I checked a while back, was a good one, but the other two are spot on.

 

But talking of krugerrands and Joe Public, dare I post again the krugerrand video?

Such an excellent bad taste piece IMO. I love the nerd, well, not love, you know what I mean. :unsure:

 

Brilliant!

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Can anyone tell me about the rules for ownership of physical gold and silver (i.e. coins)...

 

If I bought some through GoldMoney or CoinInvestDirect, for example, is there a paper trail that has to be provided to the Government, so they know I'd be owning some gold?

 

Or is there a minimum limit on how much you can buy per year without these records being required (think I read something like 5k per year, but can't remember if that was buying or selling).

 

Wouldn't fancy the idea of being forced to surrender any coins if there was a Government confiscation or something.

 

And if there are rules, does it apply to both gold and silver, or is it just for gold?

 

Here is what bullion vault says (From the help pages - Governance FAQs)

 

As a British business BullionVault is subject to British law. The situation for British users of BullionVault is typically eccentric.

 

Current legislation requires that where gold is physically delivered to British citizens in a sum exceeding £5,000 in one transaction (or aggregating £10,000 in a full year) then a report must be filed with HM Revenue and Custom's 'Gold Team'.

 

But the Gold Team no longer exists, so although the legislation remains there is no practical way of obeying it. In any event BullionVault does not routinely make physical delivery into the hands of its users (although users are entitled).

 

The nature of BullionVault's business and the fact that BullionVault retains all records of transactions has been notified to HMRC in writing and acknowledged by them. For the time being no-one at HMRC is seeking or receiving any reports of BullionVault trading or holdings.

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Indeed the term gold is very general...

Gold price is a better search term:

Try http://www.google.com/trends?q=buying+gold...=all&sort=0

 

note "buying gold" is not surging.

 

Agree, "gold price" and "silver price" are the best trend indicators I've found so far.

 

Google Trends for "gold price" and "silver price"

 

Interesting to see that we are still under May 2006 volume, so hopefully more upside in the next couple of months before a major correction?

 

Also will be interesting to see where the new maximum volume limit occurs.

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Only 25.

 

 

just joking

 

 

none, actually.

But that doesnt mean that I am encouraging such letters.

The friction here is slight. I think my posting reputation on HPC and GHPC tends to frighten off,

some of the more extreme trolls. And perhaps they see GEI as too specialised to even bother.

--------------------------------

Hey Dr Blubb

 

I was so intrigued to learn that you posted on HPC I had to register and log on there myself to take a look. I first came accross the HPC brigade from their posts on http://www.economicsuk.com/discussion/ - which is the website run by David Smith the UK economics writer for the Sunday times.

 

Being a 37 year old guy living in London UK I have every sympathy with those complaining about house prices - if I hadnt had a small inheritance and the wit to buy in Stratford in 2001 (I originate from SW London) I would probably have missed the boat but that is another story

 

Is it me or are these HPC guys posting more in hope rather than fact! Getting so vigerous over the housing market cannot be good for their blood pressure. Nutters in other words.

 

Ps. They seem to have annoyed/taken up so much of David Smiths time that he has restricted his website to approved users only - its probably a good thing that they have not found their way here.

 

PPs Keep up the good work on commodity watch radio - is a very enjoyable listen. If you were not right so damn often I would probably have written you off as one of the left of centre doomsters. BUT as you are right so often ............................

 

Question - how do you find time for so much blogging and to get your investments right?

 

Dave

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Dollar is on the brink at the moment. Maybe the US will finally start to see sense and realise that pumping additional liquidity in any form is NOT dollar positive.

 

Probably wishful thinking on my part though. They'll likely just refit their blindfolds and stumble onwards into increasing danger.

 

It truly amazes me that they think more of the same action will somehow produce a different result.

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