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Bets on interest rates comprise 81% of all derivatives. These are the derivatives that support high US Treasury bond prices despite massive increases in US debt and its monetization.

US banks' derivative bets of $230 trillion, concentrated in five banks, are 15.3 times larger than the US GDP. A failed political system that allows unregulated banks to place uncovered bets 15 times larger than the US economy is a system that is headed for catastrophic failure. As the word spreads of the fantastic lack of judgment in the American political and financial systems, the catastrophe in waiting will become a reality.

Everyone wants a solution, so I will provide one...

The US government should simply cancel the $230 trillion in derivative bets, declaring them null and void. As no real assets are involved, merely gambling on notional values, the only major effect of closing out or netting all the swaps (mostly over-the-counter contracts between counter-parties) would be to take $230 trillion of leveraged risk out of the financial system. The financial gangsters who want to continue enjoying betting gains while the public underwrites their losses would scream and yell about the sanctity of contracts. However, a government that can murder its own citizens or throw them into dungeons without due process can abolish all the contracts it wants in the name of national security. And most certainly, unlike the war on terror, purging the financial system of the gambling derivatives would vastly improve national security.

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http://www.paulcraigroberts.org/

Dr. Roberts was Assistant Secretary of the US Treasury for Economic Policy in the Reagan Administration. He was associate editor and columnist with the Wall Street Journal, columnist for Business Week and the Scripps Howard News Service. He is a contributing editor to Gerald Celente's Trends Journal. He has had numerous university appointments. His book, The Failure of Laissez Faire Capitalism and Economic Dissolution of the West is available here. His latest book,  How America Was Lost, has just been released and can be ordered here.

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China has been trying to dump the worthless dollar... by Ginger McClemons on Tuesday, Jun 5, 2012 at 12:00:03 PM
Correction:  Sheared then eaten.   ... by Tom Madison on Tuesday, Jun 5, 2012 at 3:34:07 PM
Ginger, I don't blame you for thinking that a dras... by E. J. N. on Wednesday, Jun 6, 2012 at 6:27:49 PM
The ruling elite of this DGE (Disguised Global Emp... by Alan MacDonald on Wednesday, Jun 6, 2012 at 7:46:24 PM
"The US government should simply cancel the $230 t... by Jack Heart on Tuesday, Jun 5, 2012 at 1:21:17 PM
Allrighty now!! Thank someone today for making thi... by Lester Shepherd on Tuesday, Jun 5, 2012 at 1:28:58 PM
Just cancelling the $230T in derivatives won't do ... by Ernie Messerschmidt on Tuesday, Jun 5, 2012 at 2:39:10 PM
I have always been against the death penalty. ... by Tom Madison on Tuesday, Jun 5, 2012 at 3:43:28 PM
find crueler and more unusual punishments than tha... by zon moy on Wednesday, Jun 6, 2012 at 10:20:29 AM
I just shudder when I hear people call for "Breaki... by Paul Repstock on Thursday, Jun 7, 2012 at 1:31:47 AM
a good time to watch it: click here... by Daniel Geery on Tuesday, Jun 5, 2012 at 5:20:48 PM
"Goldman Sachs takes the cake. That bank's $44 tri... by Theresa Paulfranz on Tuesday, Jun 5, 2012 at 7:01:10 PM
Theresa, you might want to read Karl Polanyi's "Th... by Alan MacDonald on Wednesday, Jun 6, 2012 at 7:58:02 PM
  I love books that give me quotes I can... by Theresa Paulfranz on Wednesday, Jun 6, 2012 at 11:07:21 PM
"Back in 1801, President Thomas Jefferson warned a... by E. J. N. on Tuesday, Jun 5, 2012 at 8:31:33 PM
http://en.wikipedia.org/wiki/John_F._Kennedy... by Mike Preston on Thursday, Jun 7, 2012 at 8:08:26 PM
Keiser Report: Paper Money Collapse (E297) ht... by Mike Preston on Wednesday, Jun 6, 2012 at 12:11:40 AM
who are betting on a finacial meltdown also have t... by Paul Repstock on Wednesday, Jun 6, 2012 at 3:42:22 AM
PCR hits it on the head, again. This is one of the... by Scott Baker on Wednesday, Jun 6, 2012 at 3:58:16 AM
Generally, I like your ideas and thoughts. You adm... by BFalcon on Wednesday, Jun 6, 2012 at 9:06:50 PM
This was put together by the Economic Policy Insti... by E. J. N. on Wednesday, Jun 6, 2012 at 6:12:29 PM
Paul correctly states, "High-frequency trades now ... by Alan MacDonald on Wednesday, Jun 6, 2012 at 7:35:11 PM
But, have we not done this to ourselves? A view f... by Paul Repstock on Wednesday, Jun 6, 2012 at 9:17:27 PM
Though I admit to my culpability, I do not exonner... by Paul Repstock on Wednesday, Jun 6, 2012 at 9:40:24 PM
A bright side to all this?  Not really, but t... by Jim Miles on Wednesday, Jun 6, 2012 at 7:46:44 PM
An Alternative to Capitalism (if the people kne... by John Steinsvold on Thursday, Jun 7, 2012 at 8:00:56 PM
First and formost you need to convince human being... by Paul Repstock on Thursday, Jun 7, 2012 at 10:11:58 PM