Could The Energy Shock Collapse the $2-4 Quadrillion Derivatives Complex?
A Look at How Derivatives Markets are Dangerously Exposed to Energy Shocks
The risks of the current oil and energy price shocks to the financial system are far greater than most people realize. The $2-4 quadrillion derivatives market is an opaque bundle of deceptions. So big and unwieldy that even those who created it admit to having no real clue of the true scale. For a long time the BIS told us it was around $600 trillion dollars globally. Then they upped it to around $1 quadrillion. I think it’s far larger. But it doesn’t actually matter, $1 quadrillion is an insane number. It is more than the value of global GDP, which is to say the combined value of all goods and services in a single year PLUS the total value of all assets in existence. Everything. The whole lot.
Meaning any chaotic unwind of the derivatives complex would be a worldwide catastrophe on a scale never before seen in history. It is by far the most vulnerable and dangerous part of our financial system, given the notional value has been allowed to balloon to such a tremendous amount, that it’s become a doomsday device. An unsolvable math equation that can be weaponized against the entirety of humanity save for the 0.01% who sit atop the global power structure.
In 2002, mega-investor Warren Buffett wrote that derivatives were “financial weapons of mass destruction.” At that time, their total “notional” value (the value of the underlying assets from which the “derivatives” were “derived”) was estimated at $56 trillion. Investopedia reported in May 2022 that the derivatives bubble had reached an estimated $600 trillion according to the BIS (Bank for International Settlements), and that the total is often estimated at over $1 quadrillion. No person knows for sure, because most of the trades are done privately.
—Ellen Brown, The looming quadrillion dollar derivatives tsunami
To get a sense of scale, here’s a useful image comparing what stacks of $100 bills totaling different amounts would look like, going right up to the mythical $1 quadrillion number.
As you can see, it’s an absurd number, and impossible to truly grasp without a point of reference. What many people didn’t know, until fairly recently, is that it’s our assets that are being used as collateral to underpin the grotesquely large derivatives complex. Our retirement accounts, our private pensions and brokerage accounts, our bank deposits, their mortgaged property. Essentially, everything we entrusted to the system, has been put up to ensure that should the derivatives complex implode the rotten core of the power structure, the mega banks responsible for the disaster, those who made the bets, survive whilst everyone else drowns.
Your assets, their collateral.
On the other side of it all assets everywhere are owned by the financial cabal itself. Every company, every bank deposit, all factories and land encumbered with debt. The whole enchilada save for the assets that were owned outright prior to the collapse. Which would be a tiny pool of asset comparatively speaking. This process is something we have come to know as the Great Taking, following my friend David Rogers Webb expose in his 2023 book of the same title. It is something I have written on extensively since, charting the evolving financial collapse and looking for the icebergs ahead of us capable of releasing the financial beast that would see the Great Taking unfold.