Menu Close

Question: How Many Derivatives Gamblers Have Been Destroyed… Spock – Bears Chat

…as interest rates have skyrocketed over the past few weeks?

Answer: probably all of them.

For, as shown here:…df/r_qs1306.pdf

… (page 10, table 4,Interest Rate Derivatives)  there are approximately…are you ready for this number?:


… of interest-rate swap bets currently in place between the Pigmen gambling junkies. Yes, that is TRILLION.  With a “T”.

For those unfamiliar with this particular parlor, in a typical interest-rate swap, one P-man takes the “fixed” side (picking a particular, static, rate) and the other junkie places his bet on the “floating” (or variable) side. So, for every small move in interest rates—up or down—one side or the other takes a financial beating.

Lately, however, as shown in this chart, courtesy of Mish’s Blog:

Posted Image

…the moves have been anything BUT “small”, with interest rates across the board skyrocketing higher, destroying the “floating” bettor’s positions. (Then again, the “fixed” side had already been decimated when interest rates crashed lower over the previous few years, so now it’s the turn of their adversaries to take the hit.)

Of course, we are assured by the Pigmen—and their AlphaThug enablers—that all these bets are “only notional”, “perfectly hedged”, “offset”, and “insured”, but—as was demonstrated back in 2008 (when Fannie/Freddie/FHLBs failed, igniting a massive CDS Implosion), these derivative dens of iniquity can’t possibly be fully hedged.

However, as I posted extensively on this very board, including here:


…back during that frightening meltdown, the ISDA and Federal Alpha Thugs simply tore up and re-wrote all the contracts, picking winners and losers (the most-notable loser being Lehman Brothers), so I fully expect the same type of action this time around.

(Spock Conclusion): Again, under my “Age of Infinite Fiat” theory, it is proven that eternal “Wash, Rinse, Repeat” cycles are perpetrated by the AlphaPigs. For, five full years AFTER “The Great Disintegration” of 2008, the same speculative locusts are playing in the same (and now LARGER) casino, placing bets they can’t possibly pay off, and skimming God-knows-how-many fiatscos in the meantime.

Ya gotta love the modern-day Ponzi Monetary System that allows such games.

Join the conversation and have a little fun at If you are a new visitor to the Stool, please register and join in! To post your observations and charts, and snide, but good-natured, comments, click here to register. Be sure to respond to the confirmation email which is sent instantly. If not in your inbox, check your spam filter.

This site uses Akismet to reduce spam. Learn how your comment data is processed.