[KR05] The Keiser Report – with Charles Goyette

December 17th, 2009 by stacyherbert

Stacy Summary: The Keiser Report, episode 5 with Charles Goyette.

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233 responses so far ↓

  • harry_w
    Dec 17, 2009 at 6:33 pm

    Why don’t you answer OP’s query about derivatives? Don’t forget to cite the one source available for the data: the BIS bank.

    Why don’t I…do what you say?

    I’d written the reply above already, was relating that to Marx (Capital Vol III, Ch 29-30), then happened to be chatting to someone who [...] well, let’s just say there are a few things that take priority over proving a point on the internet. :P

    BIS Semiannual OTC derivatives statistics at end-June 2009 Table 19:

    Notional amounts outstanding: $604,622 bn ($604 tn)
    Gross market values: $25,372 bn (4% of notional, down from $32,244 bn in Dec 2008)
    Gross Credit Exposure: $3,744 bn or $3.7 tn (15% of gross values, 0.6% of notional values, down from $4,555 bn in Dec 2008)

    Largest category: Interest rate swaps
    $341,886 bn notional, $13,934 bn gross (4%)

    The detailed statistics (next page)…show the swaps business in Euros ($123,812 bn) is slightly bigger than in dollars ($114,772 bn). The Yen is $54,079 bn and Sterling is $25,414 bn.

    As seen from the Alabama case against JP Morgan, rate swaps are of dubious value at the best of times (huge fees vs marginal savings), but they’re a nightmare in bad times (this variable rate may explode). … Unless you’re dealing them and can hedge *both* ways, then they literally hoover up all the money. Sooner or later I suspect almost everyone in the market gets their pockets emptied, except the bankers who deal them (unless they’re complete lunatics…hmmm).

  • The Underfundedmentalist
    Dec 17, 2009 at 6:34 pm

    Lefties Call for Alliance with Paulies Against War
    perhaps we’re not as divided as the 1% would have us believe

  • dan valley
    Dec 17, 2009 at 6:34 pm

    @All…this is the kind of half ass stuff that we can no onger tolerate………..”Al Gore’s office admitted that the percentage he quoted in his speech was from an old, ballpark figure”

  • dan valley
    Dec 17, 2009 at 6:36 pm

    @All…notice silvers stability????

  • The Underfundedmentalist
    Dec 17, 2009 at 6:39 pm

    silver hasn’t budged in weeks

  • Mep
    Dec 17, 2009 at 6:39 pm

    @ frances – I never checked out the freelance toons. There’s a bunch of good stuff there, including one on the Somali pirates.

  • Dedo
    Dec 17, 2009 at 6:42 pm

    @fib,…all the rubbish you read on forums is no discernment of absolution!
    Max is quite good at giving you the machinations of the machine,..but it’s up to you to decide when it reacts, etc etc..
    Try not to follow the crowd!

  • frances snoot
    Dec 17, 2009 at 6:46 pm

    @Mep:
    Thanks for the link!

  • frances snoot
    Dec 17, 2009 at 6:47 pm

    Take the I out of BIS and you’ll have it about right.

  • OP
    Dec 17, 2009 at 6:58 pm

    @Harry_
    Thanks for you precise response…
    Thats why I stay away from equity and metal trades, they are just too easy to rig.

    But when you sit back and quantify the value that ‘they ‘ have to play with it makes for one scary World.

    Being down here in Oz gives us some isolation, feel for you guys over there in the US of A.

  • Mep
    Dec 17, 2009 at 7:18 pm

    Oops . . . leaked UN report helps frame Copenhagen as a sham.

  • Tofu Charlie
    Dec 17, 2009 at 7:21 pm

    Mep — ahh so many leaks… it must be getting near xmas :-)

  • Dedo
    Dec 17, 2009 at 7:27 pm

    I just had a thought concerning climate change,.what if, and this is just an if,..the PTB have the resources to alter climate etc,..now wouldn’t that be a trick?
    (It’s good to be a God)

  • Mep
    Dec 17, 2009 at 7:29 pm

    @ Tofu – Yep . . . lotsa leaks.

    Was thinking that it’s not really fair of the US to try to strongarm China on emissions and “transparent reporting” of their progress in curbing emissions considering that probably half of China’s emissions is from manufacturing that we’ve exported to China. It’s our outsourced pollution!

    @ Mother Earth – Wherever you are, tell the people of the poorer countries to stand strong and resist our BS.

  • Tofu Charlie
    Dec 17, 2009 at 7:31 pm

    @Dedo — here’s a “what if” for ya… what if we’re already in the middle of an unstoppable methane release / positive feedback loop…? What if the IPCC leaves methane hydrates (thawing permafrost etc) out of their projections… oh.. they do.

    http://catastrophist.wordpress.com/2009/12/16/google-search-methane-hydrates-climate-debate/

    I guess you can’t regulate peat bogs…

  • harry_w
    Dec 17, 2009 at 7:33 pm

    * The notional amount, … used as a reference to calculate cash flows under individual contracts, … Gross market value is defined as the sum (in absolute terms) of … contracts … also measures the replacement cost of all outstanding contracts had they been settled in the reporting period.

    This was something Geithner talked about back in 2006 at the New York Fed, the figures he uses indicate these markets more than doubled in size between then the peak in June 2008 ($683 tn):

    Dec 4, 2009
    DERIVATIVE MARKET REFORM, Part 2
    The courageous Brooksley Born
    By Henry CK Liu
    …Treasury Secretary Timothy Geithner … warned in a speech, “Risk Management Challenges in the US Financial System”, … on February 28, 2006 – 17 months before the credit crisis that broke out in July 2007 – that the scale of the over-the-counter derivatives markets was dangerously large.

    “Although the notional total value of these contracts, now approaching $300 trillion, is not a particularly useful measure of the underlying economic exposure at stake, the size of gross exposures and the extraordinarily large number of contracts suggest the scale of the unwinding challenge the market would confront in the event of the exit of a major counterparty. The process of closing out those positions and replacing them could add stress to markets and possibly intensify the direct damage caused by exposure to the exiting institution,” Geithner said.

    Geithner observed that credit derivatives, where the gaps in the infrastructure and risk management systems were most conspicuous, were less than 10% of the total OTC derivatives universe, but were growing rapidly. Large notional values were written on a much smaller base of underlying debt issuance. The same names showed up in multiple types of positions – singles-name, index and structured products. These created the potential for squeezes in cash markets and greater volatility across instruments in the event of a default, magnifying the risk of adverse market dynamics.

    That was the speech that drew Roubini’s attention to the potential for a credit crunch. Roubini used to work for Geithner in the Clinton administration.

    There are also the exchange traded derivatives, a more transparent corner of the market. Only a small fraction of the whole market, but growing.

    Statistics on exchange traded derivatives, Table 23A:

    Futures: $19,690.6 bn in June (when the OTC figure date from) $21,218.5 bn in September.

    Options: $43,758.2 bn in June, now $48,274.1 bn.

    The distinction is important:

    The Obama administration has been trying to impose regulation on the OTC derivatives market. … proposing a bill that would establish an exchange on which derivatives, like stocks and bonds, could be traded. But the question is transparency, without which there will exist a huge information gap between the sellers and buyers of derivatives, making it impossible for regulators to gauge the level of systemic risk.

    Yet the five biggest US banking institutions depend on that very information gap to create profit. Of the $291 trillion in notional value of all derivative contracts held by US institutions, 95% is held by the big five: JP Morgan Chase, Bank of America, Goldman Sachs, Morgan Stanley and Citigroup. In the first six months of 2009, in the midst of a deep recession, these banks made more than $15 billion trading derivatives. Transparency provided by trading in an exchange would eliminate much of the information advantages now enjoyed by the big five …

    On September 28, 2009, the Office of the Comptroller of the Currency report on banks derivatives trading activities showed that the estimated value of all derivatives held by US commercial banks was rising, increasing nearly 1% over the last quarter and 12% year to year, to $203.5 trillion (total includes interest rate, foreign exchange, credit and other derivatives).

    … Banks exposure to derivatives, while falling slightly, remains alarmingly high. Bank of America’s total derivatives-related credit exposure relative to its capital was 137%; Citibank 209% and Goldman Sachs 921%.

    Trading credit derivatives is once again highly profitable. After seeing huge losses on these instruments toward the end of 2008 and into first quarter of 2009, banks generated $1.9 billion in cash and derivative revenue in the second quarter of 2009. … As banks find it difficult to find creditworthy borrowers, they are using their funds to trade derivatives to drive profits. This new asset bubble, built by Fed funny money, unlike previous ones does not even bother to create an illusion of prosperity or full employment.

    It’s a swarm of state-supported vampire squid (with Goldman Sachs leading the way), sucking as much wealth out of the global economy as they can, for as long as they’re allowed to.

    Given the incoherence of the political reaction to all the bailouts, guarantees, QE & ZIRP, that’s likely to be for quite some time.

  • harry_w
    Dec 17, 2009 at 7:37 pm

    * messed up the first quote about Geithner’s speech, it ends:

    …magnifying the risk of adverse market dynamics.” [endquote]

  • Dedo
    Dec 17, 2009 at 7:40 pm

    @Tofu,..what if you try and live your life the best you can without interference from others who think they know best,.(for themselves) huh!
    I know you may think you know what’s best for all,..with your limited knowledge,.but I’d beg to differ, somewhat.
    A managed society is a good thing,..and also a bad thing,..dependent on the managers,..: )

  • dan valley
    Dec 17, 2009 at 7:42 pm

    @DEDO…that would be Anarchy friend….

  • Tofu Charlie
    Dec 17, 2009 at 7:43 pm

    @dedo.. agreed. I long stopped prefacing all my written comments with “In My Opinion”, but I hope the implication is still there, and assert my right to be opinionated.

    Any actual thoughts on methane release being left out of the climate debate?

  • California Doctor
    Dec 17, 2009 at 7:47 pm

    @Tofu Charlie – “can’t regulate peat bogs”

    That’s no joke.
    What kind of psychology actually believes that passing a regulation will change the biology and chemistry that occurs in a peat bog?

    I’m so sick and tired of smug bureaucrats burning tax payer money on these “conferences”.

    I mean, how long is this Copenhagen conference? Clinton’s entourage has been burning USD in Copenhagen for a long time.

    Must be great for Denmark.

    Anyone want to go to Copenahagen on a free trip at taxpayer expense?

  • Dedo
    Dec 17, 2009 at 7:49 pm

    @dan and Tofu,……I could personally run a more sound society with the limited knowledge I have at my disposal,..so I know the problems are “manufactured” justly to suit,..
    So all this rhetoric is just that!,..”To Suit”,..made to measure,..you know this ,.of course?

  • Tofu Charlie
    Dec 17, 2009 at 7:50 pm

    @Farang Dan — what flavour of anarchism do you like most?

  • Tofu Charlie
    Dec 17, 2009 at 7:51 pm

    @Dedo — yes but what about methane release? Here’s your reasoning:

    (1) I don’t know anything
    (2) experts know everything
    (3) leave all opinions to the experts

  • dan valley
    Dec 17, 2009 at 7:54 pm

    @Tofu…Why Anarcho-capitalism naturally….the only thing you need is Property rites and contract enforcment…..Note…If said was brought about there would need to be an adjustment period to ween off the so called Pimps from the govt. Teat.

  • dan valley
    Dec 17, 2009 at 7:55 pm

    @ Tofu…..PootThai Mai…Tamai Khun Kowjai Farang??

  • Dedo
    Dec 17, 2009 at 7:56 pm

    @Tofu,…lol,..you do make me laugh,..that’s my reasoning is it?
    okay, if you say so,..; )

  • Tofu Charlie
    Dec 17, 2009 at 7:57 pm

    @dedo — well, just that comment, seemed to be. You basically said, if you don’t know everything your opinion is invald.

    what… about… methane… release?

    Go out on a limb… humour me, please… don’t be a stone wall…

  • Tofu Charlie
    Dec 17, 2009 at 7:58 pm

    @Dan — pad thai gai krap!

  • Tofu Charlie
    Dec 17, 2009 at 7:59 pm

    Dan (just a guess, am i wrong? f’ing excellent spelling otherwise)

  • Dedo
    Dec 17, 2009 at 8:01 pm

    @Tofu,…If I’ve got to explain to you the myriad of life and it’s consequences,..maybe I should be elevated to god status,..like you!,..: )
    There are many , many variables to the order of chaos,..maybe you should step back slightly and learn more!

  • Tofu Charlie
    Dec 17, 2009 at 8:03 pm

    @Dedo — you think I’m not in touch with my ignorance? You think I don’t want to destroy my mind?

    Why resist talking about specific, tangible, substantial things?

  • dan valley
    Dec 17, 2009 at 8:06 pm

    @Dedo….Its as good as it needs be when you type it in english.

    Chun Mai chop gin pad thai….chop gin Panang gai deegwa.

  • dan valley
    Dec 17, 2009 at 8:07 pm

    Sorry meant that to be @ Tofu

  • Dedo
    Dec 17, 2009 at 8:08 pm

    @tofu,…lol,..”your” specifics are not “my” concern,..or should they be,.because you believe it to be so?
    (many have been wrong in the past) ; )

  • Tofu Charlie
    Dec 17, 2009 at 8:08 pm

    @Dan — I meant your english spelling? Were you asking me why I assumed you’re a farang?… i know less than a handful of thai phrases, so didn’t really understand..

  • Tofu Charlie
    Dec 17, 2009 at 8:09 pm

    @Dedo — this is why I can’t converse properly with new-agers and hippies… if you ever want to have a less abstract conversation I’ll be here.

  • whitemale08
    Dec 17, 2009 at 8:11 pm

    How can the Danish say to so-called ‘poor countries’: “Western countries will give you $100 billion of worthless Federal Reserve Notes to fight global warming”,

    when ‘Western countries’ have to borrow from ‘poor countries’ like China to compell them not to develop their national right to develop industries????

    Only Lyndon Larouche’s 4-Powers solution, by partnering with China, Russia, and India will work get us out of the global financial crises.

  • dan valley
    Dec 17, 2009 at 8:12 pm

    @Tofu….my spellig is terible regarliss of what langwage I use…but I asked how or if you understood the meaning of the word Farang.

  • Dedo
    Dec 17, 2009 at 8:12 pm

    @Tofu,….you seem to categorize folk, like you do your opinions,..
    Doesn’t sound very tangible to muah!

  • dan valley
    Dec 17, 2009 at 8:15 pm

    @Just get it right….Al Gore has been forced to use the weather machine….dum dum dum..

  • Tofu Charlie
    Dec 17, 2009 at 8:17 pm

    @Dedo — (sigh).. yeah, labels, compartmentalization, (and language in general) is useful to build a conceptual framework. Having one word to stand for an idea is quite useful shorthand if you want to connect with other people on a common level. (And yes, sensai, I agree… conversely, language is useless and troublesome).

    If/when you finish your DMT trip and want to talk about real-world stuff, rather than just “no it’s not, for the buddha tells me so”… as I say, I would be grateful to converse with you.

  • Tofu Charlie
    Dec 17, 2009 at 8:20 pm

    @Dan — meh. Too many flights go through BKK. I like the country too, especially the north…

  • Tofu Charlie
    Dec 17, 2009 at 9:19 pm

    @Frances — lol!! Whitey McBodhisattva talks about Buddhism and Hinduism, & Christianity… but forgets Taoism and Shinto!

    SPIRITUAL FAIL! :-) lol! I’m such an ass…

  • Alister
    Dec 17, 2009 at 9:25 pm

    The AGW Danish folks have told the world that in 2010 US pensions go bust, gold crashes, China flops, Bunds soar, predicts Saxo ; therefore, it’s not unlikely that in 2010 US pensions will not go bust, gold doesn’t crash’ china doesn’t flop, bond’s decline

    http://www.telegraph.co.uk/finance/financetopics/financialcrisis/6835576/US-pensions-go-bust-gold-crashes-China-flops-Bunds-soar-predicts-Saxo.html

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