Headed for a Derivative Meltdown

Brian Dunaway wrote:

The financial press is awash in alarms such as this, and among these are claxons from well-respected conservative billionaire investors not formerly disposed to hyperbole.

This is not your father’s financial crisis, or for that matter your grandfathers’, or your great, great …

Here’s the money paragraph:

“What would happen if there is an actual failure to deliver in the silver market? Mr. Gold says, ‘If that gets confirmed, then that one day you will see a huge spike, but markets won’t open after that. That will cascade. What will happen is all the COMEX contracts for both silver and gold will default. That will spill over to the rest of the CME (Chicago Mercantile Exchange). It has contracts on US Treasuries and stocks. They have contracts on everything. If the silver contracts blow up and the gold contracts blow up, how much confidence are you going to have on pork bellies or stocks. … The derivative market is $2 quadrillion. In the future, you are going to measure your wealth by how many ounces of silver and how many ounces of gold you own. … Once you get a failure to deliver, you will get a Mad Max scenario. Failure to deliver will melt down all derivatives. The world runs on credit, and credit runs on faith. If you break faith, then you have a real problem in the financial markets and the real economy.’”