Algorithms play a significant role in the modern financial world. The integration of technology and advanced mathematical models has transformed the way financial markets operate and how financial institutions make decisions. Algorithms are used to execute large numbers of orders at extremely high speeds. These algorithms analyze market conditions and execute trades in milliseconds, taking advantage of small price discrepancies. In essence, all markets are mostly traded by High-Frequency Trading. When we couple High-Frequency Trading with financial derivatives we have kryptonite.
The use of algorithms in finance requires careful oversight to prevent issues like algorithmic bias, market manipulation, and systemic risks. As technology continues to evolve, the financial industry will likely see further advancements in algorithmic applications and their impact on decision-making processes. Oversight is lacking due to the nature of lobbyists and Wall Street corruption and greed. It seems that nothing will ever be done to stop the manipulation of the markets through financial derivatives. Well, until these derivatives just blow up of course thus blowing up the entire financial system.
Brooksley Born is an American attorney and former public official who gained prominence for her role in warning about and advocating for the regulation of over-the-counter (OTC) derivatives, particularly during her tenure as the chairperson of the Commodity Futures Trading Commission (CFTC) from 1996 to 1999. Born’s concerns about the lack of regulation in the OTC derivatives market, which includes financial instruments like credit default swaps, were prescient in light of the later financial crisis of 2007–2008.
Born advocated for increased transparency and oversight of these financial instruments, but her efforts were met with resistance from key figures in the financial industry, including then-Treasury Secretary Lawrence Summers, Federal Reserve Chairman Alan Greenspan, and Securities and Exchange Commission (SEC) Chairman Arthur Levitt. Born’s accurate warnings were brushed aside so the Wall Street machine could continue with reckless abandon. The lack of regulation in the OTC derivatives market was seen by many as a contributing factor to the financial crisis in 2008. The Wild West antics of Wall Street and the banking sector bring us to the dangerous financial situation of today. The governments of the world, especially our own, are only more than willing to keep spending money that they do not have therefore significantly adding to more debt and risk.
The numbers now compared to 2008 are significantly bigger. The bigger numbers now concerning derivatives and debt mean bigger consequences this time around. The inevitable blowup in our financial system now will be truly historical. Historically large debt and leverage numbers will directly lead to the biggest financial system blowup in history. It is right around the corner and it’s global. The central bankers, the commercial bankers, and the politicians are more than willing to keep the money spigots open for as long as they can. I guess we can just expect unlimited money printing, unlimited deficit spending, and unlimited debt until the system fails on its own. If not I am sure the deep state banking cabal will tear down the fiat system that was originally built to ultimately be torn down. Hopefully the good guys with the white hats on will be in charge of cleaning up the mess and setting up the next financial system and our new monetary system.
The US budget deficit numbers balloon to the largest since COVID era
The US Government posted a $1.695 trillion budget deficit in fiscal 2023, a 23% jump from the prior year as revenues fell and outlay for Social Security, Medicare and record-high interest costs on the federal debt rose. Bidenomics is back to ballooning deficits. The big deficit, which exceeded all pre-COVID deficits, including those brought about by Republican tax cuts passed under Donald Trump and from the financial crisis years, is likely to inflame Biden’s fiscal battles with Republicans in the House of Representatives. Expect more confusion and chaos when it comes to the political situation. The numbers from our wonderful politicians over the decades speak for themselves. Keep spending to win those votes. You are financially ruining our country.
The Biden Administration is adding $1.2 billion in debt per hour
Graham Summers at Phoenix Capital Research recently made an eye-opening statement in one of his daily updates. Graham states
“The U.S. is now adding debt at an exponential rate. The U.S. racked up its first $10 trillion in debt over the course of 232 years. Following the Great Financial Crisis, it added another $10 trillion in just nine years. The next $10 trillion took only four years. And by the look of things, the next $10 trillion will take even less than that. The U.S. has added $2 trillion in debt in the last four months. We’re now adding $1.2 billion in debt per hour.”
Any way you look at that deficit spending you would ask yourself “How can that continue?” Well, it can continue until the financial system folds up like a cheap suit. Maybe they can print so much money out of thin air that our dollars will be almost worthless. Do you remember the pictures of the wheelbarrows full of paper money during the Weimar Republic in Germany?
The numbers concerning world debt are mind-boggling
Global debt includes the combined debt of governments, households, and non-financial corporations worldwide. This debt can be in the form of government bonds, corporate bonds, mortgages, and other financial instruments. To get the most accurate and up-to-date information on global debt, you should refer to authoritative sources such as the International Monetary Fund (IMF), the World Bank, or other financial institutions that regularly publish reports on global economic indicators. That statement is comical in itself. I am sure the IMF, the World Bank, and other financial institutions are telling us the whole truth regarding debt. I have included a link to the leadership at the World Bank Group. I’m sure these cronies have our best financial interests in mind.
The world debt today stands at roughly $310 trillion. The world debt in 2000 stood at $80 trillion. For those out there who can do simple mathematics, the world debt over the past twenty years or so has quadrupled. And this is what they are telling us. What really is the world debt? Regardless the world debt numbers speak for themselves. The world debt is disturbing and dangerous. The global debt is certainly unsustainable. It is only a matter of time before the whole world experiences a debt crisis. When the debt can’t be paid, defaults occur. Is it so hard to understand that when the debt goes bad, the asset value behind that debt also goes bad? The world debt numbers suggest the inevitable outcome will be very bad for the global financial system.
Bill Bonner is a very smart man and a great writer. The Bonner Private Research is highly recommended for any investor out there. In one of his recent articles, he commented briefly on world debt. I wanted to mention it in its original form. Keep up the great work Bill.
“There is $307 trillion of debt in the world. Every penny represents a commitment by somebody to pay somebody else. And all of them made plans…and other commitments…based on assumptions that are no longer correct. They planned to refinance at 3%. Now, they must pay 6%…or 10%…or more. We are describing a ‘credit crisis.’ When they changed the US dollar in 1971, the economy gradually became dependent on credit. Instead of paying for things with money they had already earned, people began to finance their houses, their cars, their dinners at TGIF, their corporate takeovers, their wars – everything – on credit. And when credit becomes harder to get and more expensive, there is a ‘crisis.’ And when investments go bad, the losses are not taken from past output…but from the future.”
ChatGPT can’t write like that!
The uninsured deposit numbers at banks are unconscionable
Of the roughly 4500 banks, $7 trillion exists in all banks that are uninsured. The 4 biggest banks Bank of America, JPMorgan Chase, Citibank, and Wells Fargo control $4 trillion of uninsured deposits. Bank of America just reported unrealized losses of $131.6 billion on securities in the third quarter. Yes, the FDIC insures accounts up to $250,000 per account, per institution. Let’s assume that is true because have gone over the FDIC numbers of insuring roughly $12 trillion of deposits with $150 billion in assets. Whatever the exact numbers are they don’t make any sense to anyone thinking our deposits are safe. What products is not FDIC insured you might ask? Well, looking at the FDIC website it is pretty clear.
What products are not insured?
Several non-deposit investment products are not insured by the FDIC, even if they were purchased from an insured bank. These include:
- Stock investments
- Bond investments
- Mutual funds
- Crypto Assets
- Life insurance policies
- Municipal Securities
- Safe deposit boxes or their contents
- US Treasury bills, bonds, or notes
Of course, the US Treasury bills, bonds, or notes are backed by the full faith and credit of the US Government. We all know those are secure since
The government can always just print more money according to Alan Greenspan.
Derivative financial numbers are astronomical
Over-the-counter (OTC) derivatives are financial contracts that are privately negotiated and traded directly between two parties, without going through an exchange or other centralized trading platform. These derivatives are customized agreements whose terms are mutually agreed upon by the counterparties involved. OTC derivatives play a significant role in the financial markets and are used for various purposes, including hedging, speculation, and managing risk. Some key types of OTC derivatives include Forward Contracts, Futures Contracts, Options Contracts, Swaps, and Credit Default Swaps.
The financial crisis of 2007–2008 drew attention to the risks associated with OTC derivatives, leading to calls for increased regulation and transparency in this market. Regulatory reforms, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act in the United States and similar measures in other jurisdictions, aimed to address some of these concerns by introducing reporting requirements and central clearing for certain types of derivatives. Over-the-counter (OTC) derivatives are a time bomb waiting to implode the entire financial system.
The total financial derivative market in 2008 was roughly $500 trillion. Today the total financial derivative market is over two quadrillion dollars. A quadrillion is a thousand million million. A quadrillion is a 1 followed by 15 zeroes. We could also think of a quadrillion as a thousand trillion or a million billion. I think of a quadrillion dollars of financial derivatives as an absurd number, put together by absurdly corrupt people that will ultimately bankrupt the entire financial system. Oh wait, we are talking multiple quadrillion.
The too big to fail banks control many of these derivatives
Now this is where it gets really scary. The banks are supposed to be safe. The banks are supposed to hold and safeguard our money. We already have mentioned many times that banks are sitting on billions of dollars of unrealized losses due to bonds and commercial real estate. Did you know that the top 5 banks control $208 trillion in derivatives? JPMorgan Chase controls $58 trillion in derivatives. Goldman Sachs controls $57 trillion, Citibank $55 trillion, Bank of America $23 trillion, and Wells Fargo controls $15 trillion in over-the-counter (OTC) derivatives. After that, we see a substantial drop off to State Street Bank, US Bank, PNC Bank, Bank Mellon, and HSBC. Regardless, when just one of these banks goes down, an avalanche will start. You will not want to have substantial bank deposits tied up to the financial system when this occurs. It will be game over.
The financial numbers of the stock market are obscene and comical
The stock market hasn’t gone anywhere in the last few years. But the internals are good, right? No. The top seven stocks are, by market cap, Apple, Microsoft, Amazon, Alphabet (Google), Nvidia, Meta (Facebook), and Tesla. A decade ago, they accounted for roughly 7–8% of the total S&P 500 index by market cap. Today, according to figures compiled by Bank of America, they weigh in at close to 30%, a record high. The markets are skewed by a few names. Most of the high-flying stocks from 2020 and 2021 are down by 50% to 90%. The media won’t tell you about those apples. How do you like those apples?
It is no longer a low interest-rate environment
In the meantime, interest rates going up will cause havoc for stocks. Higher interest rates are a problem for all borrowers. The 10-year yield 3 years ago was .1%, today close to 5%. A 30-year mortgage is now 8–9% if you are lucky, while 3 years ago it was 2–3%. This year, the interest on the federal debt is at $883 billion, which is about even with the Pentagon budget. The banks were bailed out in 2008 with $800 billion, today it would be many trillions. The US national debt is $33.5 trillion and growing. In 2000 the US national debt was $5.6T. In 1980 the US national debt was $900 billion when Reagan took office. $50 trillion in federal debt is expected by 2030. These numbers folks are unsustainable. Higher interest rates mean all of this debt eventually needs to be refinanced at higher rates. It will cost way more to service this debt. These numbers are a serious problem and they are only getting much bigger and much worse.
We talked about many numbers this week. It is very overwhelming. Let’s make a few simple statements. We see confusion and chaos today more than ever. We see this politically, financially, economically, and socially. It is only getting worse. Printing more money and taking on more debt is not the solution to any of this chaos and confusion. These numbers are a way though to crash the entire financial system as we know it. These numbers are enough to kill the purchasing power of our dollars. These numbers will cause many people to lose all of their money over the next decade.
Distance yourself from what is coming. A financial storm is coming of epic proportions. You don’t have to comply with their agendas. It is all nonsense but your nest egg is not. There is a movement towards holding tangible assets in your possession. It is either your wealth held in their system under their watch and control or physical gold and silver in your control under your watch. Place your bets. What’s it going to be? Time is running out.