That carries into the banks HEAVILY, I think it is criminal how little is kept onhand. We've taken fractional reserves into uncharted territory towards the extreme. There is only 43 billion in reserves!
All that is needed is one of those calls to unwind or go badly, and we'll see something the size of Wells Fargo or BOFA explode instantly. I could see that as the trigger to a meltdown.
It would make that bank meltdown in England a few years back look like nothing. He took that bank down with a few billion in derivatives that unwound on him.
That would spook everything heavily.
You are talking about Barings bank and their prop trader in Indonesia....
yeah it is pretty scary. To be honset a large percentage of those swap agreements are very plan vanilla fixed/receiver or total return swaps that have little to no risk in the market place (its like a fixed income manager who has a $100,000 buying $10 million in Euro Dollar contracts - zero risk), but it is the Credit Default Swaps and other exotics that have zero liquidity or the notional value is wratched up so much it is crazy.....i cant wait to see GM officially explode and then see what happens.....there is approximately 3.5x the notional value of their outstanding debt in CDS swaps alone
