Derivatives and Leverages and Bubbles, Oh My!


Perhaps you have questions on what these financial tools are and how they caused the many “crisis” which plague the world’s economies and ours. I did too. Now I have some answers… but you might not like them.

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Q. What is a derivative?

A. A derivative is a word that describes a root word, such as sub in submarine. ‘Sub’ is the root word and ‘sub-marine’ is the derivative. A derivative is like a leech, it can’t exist without a host.

So, a sub-prime real estate loan is the derivative form of a real estate loan.

In general, a derivative is not a real asset. Examples of real assets are: stocks, bonds, cash, and real estate. A derivative, as its name suggests, is a financial tool that only attains value through the value of something else. It’s a speculation on future values. In other words, derivatives are a kind of side bet on whether or not real assets will be worth more in the future than at their current value. If you lose money on a derivative bet, someone else generally gains – since they bet the opposite of you. If the government loses this bet, the taxpayers ultimately pay the difference. This is the shell game constantly being played by our financial leaders, with no regulation and no actual real assets to back these bets up. In other words, when the government loses this future derivative bet, they just ask the Federal Reserve Bank to print up more worthless paper money (done digitally) of which the debt burden of this ‘Monopoly Money” gets passed on to the taxpayer (who pay for the principle and interest of the losses). And the game continues, on and on and on…

Example: If the United States agrees to pay $60 per barrel of oil in 6 months time with Saudi Arabia, no matter what the actual price will be in 6 months time, there are three possibilities with regards to profit and loss for this future value bet:

  • The current price in 6 months equals $60. Neither country profits or looses money.
  • The current price in 6 months goes up to $70. Saudi Arabia looses $10 per barrel.
  • The current price in 6 months goes down to $50. The United States looses $10 per barrel.

I read somewhere that the value of these derivatives are on average three times the actual value of the assets they are predicated upon. This means that two-thirds the value of a derivative is pure speculation. Therefore, coffee futures are three times the value of the underlying coffee, being a projection (or prediction) of the coffee’s future value. The inherent problem with this is that values don’t always go up, so huge or total losses can easily take place in betting on future derivatives prices.
In general, derivatives are not part of the GDP, or Gross Domestic Product, since they cannot be accounted for until a future date. Thus, losses and gains can be hidden from the public until the next financial earnings report the following quarter or year.

Derivatives losses, since they can be written off (to taxpayers) and since these bankers have virtually unlimited reserve monies to play with, are what has caused the so-called “financial crisis”. The bundling of these derivative sub-prime mortgages into AAA rated stocks (different parts of many different real estate loans get bundled together on paper to equal one stock or asset) was a dirty trick played on all of us, as the bankers ultimately knew that these derivative sub-prime real estate loans would by necessity be defaulted on, since the payments for these loans would eventually exceed the income of the borrowers as the interest rates jumped according to the sub-prime contracts, and the falsely propped up prices in the real estate markets had to drop (or correct themselves) back to somewhat realistic values, meaning that the loans would be more than the actual property is worth.

Deregulation of the banking industry and the letting go of these regulators – persons whose job it was to ensure these types of loans could not be given to people who could not afford them – was one root cause of this planned fiasco. There were no accidents here. This was a premeditated attack on the dollar and the economy of the United States. For while these banks and the large corporate sponsors of these derivatives get “bailed out” by our president and legislature (who receives funding and kickbacks through lobby’s and future contracts, stock options, and future appointments (jobs) with said corporations) – or more accurately by the taxpayers and the future generations who will pay for these bailouts – the taxpayers get no such recompense.

The fact that all home mortgages in the United States could have been paid off for much less than the amount of money that was given in the form of “bailouts” to mortgage companies, much of which went to foreign banks, is the ultimate sign that our country is being run by the most heinously corrupt clan of conspirators in history, and will very likely be the downfall of our beloved country.

Guess who the largest contributors to the Obama campaign were?

You guessed it… the banks that received the “bailouts”.

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Q. What is a bubble?

A. A bubble is when prices of real assets or derivatives are severely over priced or artificially inflated, meaning that the actual value is much less than the current prices. This is usually caused by fictitious hype about a market or product, its location, its future worth, and other false predictive values. In other words, the government, corporations, banks, or brokers lie about their assets’ value in order to reap profits on unsuspecting investors.

In the real estate market, this means the price of the homes in an area are too high, with nothing real to back up their value. A house in Los Angeles that costs $1.2 million might sell for $120,000 in Idaho. But a simple overdue 8.0 earthquake would remedy that discrepancy in the blink of an eye. A castle set on 100 acres of land in Utah might be worth the same as a small 1-bedroom apartment in Manhattan overlooking Central Park. Pray for no earthquakes or typhoons here!

With the dot-com bubble, it meant that speculation on the future value of these virtual businesses were eventually shown to be false, and that the stock prices dropped or “corrected” themselves to the actual value – or just failed altogether. Though stupendous profits can be made on the way up, most investors will always eventually lose the game as the price drops below what was paid for the asset at its peak performance. Thus, the “bubble” is said to be deflated, or popped.

Again, there is nothing accidental about this type of market fluctuation and correction. The Federal Reserve and their partner banks and corporations with help from the misleading media are always in control of inflation and deflation, supply and demand. The knowledge of these types of bubbles and how and when they will pop is not an unknown entity. Nothing happens by accident in the stock market or the futures markets.

Bubbles are blown up and snuffed by these bankers, usually after they abandon their market shares.

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Q. What does it mean to leverage something?

A. To leverage something (like money) you would basically be borrowing something in the hopes or expectation of making more of that thing in the future. In the case of money, you would take on debt by borrowing money at interest and then using that money, say in the stock market, to purchase assets (stocks). If the stock goes up in value more than the interest you must pay on the original debt, you have leveraged that money to make a profit.

Even more simple to understand: if you could borrow the same money at 5% interest and then invest that money in a bond or CD (basically a virtually no risk investment – you hope.) which would return 10% guaranteed, you are leveraging that debt and making 5% profit without even making an effort.

So, let’s take a look at how banks leverage your money – the money you stow away in your savings account for a rainy day:

Let’s say every month you put $100 into you’re savings account, and are being paid 5% interest on your money (peanuts, really).

How can the bank afford to do that?Well, the bank takes you’re money and will invest it in loans, credit, funds, or other riskier and higher yield investments. Let’s say that bank makes an average of a 15% return on yours and everyone else’s savings account money before it pays all of you your share (5%). Well, the bank has just borrowed (leveraged) your money in order to make 10% profits on your money. So while you feel like you are getting a fair but quite meager return on your so-called “safe” investment (your stagnant savings account), the bank is actually risking your money to make money of its own, and letting you have a small portion as an incentive to keep saving – depositing more money into your account for the bank to leverage. This is why they can pay you that measly 5% interest.

And, this is why I despise the banking industry!

These bankers are really making money off of your unwillingness to take a risk with your own hard-earned money. Of course, they reinforce this fear and make the whole system as confusing as possible through red tape, fine print, and the media so that you are kept in the dark about this process.

The expression “Time is money” is the most true statement ever made in the financial world. And so, if you can leverage your time, making money while you sleep, then you are way ahead of the game.

A business owner who hires workers to produce goods, which will in turn make more money for the owner, is leveraging his time. Throw in a manager who runs the shop for even more leverage. He pays a percentage of the profits of these products to the workers and to the manager, while he can be doing other things… like setting up another business with the profits from the first (leveraging the initial leveraged money), or sipping a cocktail at the beach (making money while he sleeps). If this operation runs smoothly, his time is leveraged 100% since he never even needs to set foot in his shop. The same could be done on the Internet, where manufacturing, sales, and shipping are all done virtually from home – or are leveraged through an Internet company. This leveraging of time is the most important lesson in business you can learn. Without it, we’d have nothing but the working class.

Now we come once again to the government…

These guys leverage huge amounts of money, and the only risk is to the taxpayer. We as taxpayers are easily trained to just keep paying our illegitimate taxes. And if the money is lost, they just ask the Fed to print up some more out of thin air… but we have to pay the bill. The taxpayers are somewhat like the aforementioned workers in this respect, which keep on working to pay for, or leverage the governments gambling habit. We as citizens are all leveraged as collateral since we keep producing revenue in the form of taxes, and since we pay for the interest attached to the new money that is printed up by the Federal Reserve when the bets are lost. In other words, we pay triple taxes: once for the original investment, once again for new printed money to cover in bad investment (which makes someone a profit since that money doesn’t just disappear), and once again over time for interest owed on both sets of monies. Profits however, never seem to get redistributed to the real investors: the people of the United States who pay their taxes under a false sense of duty, never even realizing that any of these taxes (especially the income tax) goes towards the services they would expect them to, and instead goes almost exclusively to pay off the national debt (to the Federal Reserve Bank, which is a group of private international bankers that operate above the law and completely outside of the control of our government, the president, the legislature, and the taxpayers who supply it).

And so this is how your government operates: controlled by the bankers who lend it money at interest.

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Bonus Q. What is Zionism?

A. Zionists are the bad guys of the Jewish community. They are Jews who occupy and support the “State of Israel” and who commit heinous human rights violations and crimes against Palestine. They are in the middle of a genocidal campaign against the Palestinians who rightfully live on the land the Zionist Jews are incrementally stealing from them with the support of the United States government, and have been for many years since the inception of the State of Israel. Zionists are the group of Jews who tried to destroy the economy of Germany in the 1930’s by attempting a boycott of the entire countries exports. Zionists allowed and even encouraged the Orthodox Jews be persecuted in their place during WW2. Zionists lie about the supposed 6.5 million Jews who were killed in concentration camps at the hands of the Nazis, even though there weren’t that many Jews around to kill. And Zionists are the ones, along with the ADL (Anti-Defamation League) who will call me an anti-Semite for daring to tell the truth here. Many have died trying to do this. The main difference between Orthodox Jews and the Zionist Jews is simple: Orthodox Jews follow and believe in God, while the Zionist Jews have a distaste for this religion and its God. Zionism equals Godlessness according to the Orthodox Jews. Some Zionists have even admitted that Lucifer is their God (though they died quickly after). For more information on Zionism, one should read the ‘Protocols of Zion’ and the ‘Babylonian Talmud’, which essentially lays out their plans to take over America and the world. No, seriously! Though it sounds crazy, it’s not a joke when people say (Zionist) Jews own Hollywood, the banking industry, the Federal Reserve, etc… they aren’t kidding. You must understand the control this small group has over the American economy and its presidents, its legislature, and even over the Christian community to fully understand the trouble we are in as a nation and how this group has been subverting ours and other cultures for so many years. (SEE: Christians United For Israel – CUFI.com). Billions and billions of our tax dollars are given to Israel each year. Though they are armed with nuclear weapons, they are the only country not signed on to the nuclear non-proliferation treaty, even as we chastise Iran for this. Iran has no weapons with nuclear capabilities of course, and incidentally they are the sworn enemy of Israel and the Zionist Jews. We (America) sell them weapons and aircraft… new, deadly aircraft. These are the planes, illegal bombs, and weapons that kill the Palestinians, and that they threaten Iran with and to “take the whole world down with them”. Without this massive funding by America, the state of Israel would not exist. When the Israeli flag is displayed next to the American flag in the Oval Office, and the president’s chief of staff is a duel Israeli-American citizen whose father is linked to real foreign Israeli terrorist groups, you surely must recognize that something sinister is going on here. They are the great deceivers. This transcends bigotry. There is no prejudice or so-called anti-Semitism in this rant. If you had asked me ‘what is a tick?’, I would have had the same repulsion to that blood-sucking insect which attaches on and won’t let go as I now do towards this extreme manipulative group; who again are not to be confused with the majority of good Orthodox Jews. They are not the same, at all, in the least! Zionists are the bankers! Zionists are the destroyers of our country. Learn the truth before it’s too late…

Here is a good documentary, which explains this situation very well. Watch if you dare… for when you see the influence these Zionists have over American politics and foreign affairs it will shock the hell out of you, even as you watch every elected acting president we’ve had in the last 20 years wearing a little Jewish hat while praying at the Wailing Wall:

http://www.youtube.com/view_play_list?p=2B116B08D179CD5A&search_query=the+khazarian+conspir

Clint Richardson (realitybloger.wordpress.com)
September 26, 2009

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2 Comments

  1. » Derivatives and Leverages and Bubbles, Oh My! « Reality Blog » Stock Prices Online
  2. Housing, Leverage, the Dollar and Purchasing Power

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