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Jealous-Elephant t1_iz0vjrm wrote

I hope someone smarter than me says if I’m right or not but basically this is talking about “risk” in the system? And it’s hard to understand who owes money to who and if things were to go bad it could go bad for a lot of people/places because of this “risk/blind spot”?

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b1ackfyre OP t1_iz0x778 wrote

You’re more or less correct, or so I believe. Hope someone else smarter can chime in as well and correct me if need be.

Here’s how I understand it. When a country accesses a foreign country’s market, currency swaps have to be made. There’s not a transparent system for who owes who and for how much, etc. Since we’re talking about 10s and 10s of trillions of dollars in swaps and IOUs, a massive scale, the lack of transparency could spell bad news. Imagine if there’s corruption involved anywhere. Imagine if there’s a further downturn, mass liquidations, mass swaps for native currency, a crunch on dollars as firms raise capital etc. Seems like very messy accounting that’s difficult for regulators to audit and keep track of and difficult for central banks to support in times of crisis.

TLDR: There are tens of trillions of dollars in currency swaps and liabilities that are difficult to audit and account for. Because of the scale of money and lack of transparency, there’s a lot of room for something to go wrong.

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Jealous-Elephant t1_iz0y6kq wrote

Keep the smarter than train rolling. Thanks! Seems like it involves a lot of trust. I wish I had that!

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b1ackfyre OP t1_iz0ys8a wrote

More info here, but paywall: https://www.bloomberg.com/news/articles/2022-12-05/-missing-65-trillion-in-derivatives-dollar-debt-sparks-concern

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Jealous-Elephant t1_iz0z4z2 wrote

Derivatives in the headline!! haha. It’s alright imma keep my eye out and try and learn more cause that’s a lot of trillions. Thanks stranger

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Darkekf111 t1_iz13l2k wrote

https://12ft.io/ is a great way to remove most paywalls.

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oniwolf382 t1_iz3al41 wrote

From what i'm recalling in my international finance classes, undergrad and masters:

Basically, when a company needs to do business with a company in another country, they sign a contract to do business at an agreed upon price in the target countries currency. Their finance department can then do some risk analysis and purchase contracts and derivatives to lock in favorable rates now if they believe exchange rates will rise at the time they must pay their contract in 6-months or 12 monts etc.

If the rate declines, their derivatives premiums are the only cost they're out, and they pay market rate, and it's no skin off their back.

That's how non speculators are supposed to use these tools.

Now this debt swap stuff, is chasing what are called PIPS. tiny adjustments in the rates between currencies. Basically .0001. So it requires large sums of capital to to profit from small changes in the market. These firms are are providing liquidity and speculating on the market for companies like above (who are using derivatives as insurance products) to turn a profit.

The off the books stuff is worrisome, as that's where regulators should be focusing one some auditing. As the creditworthiness of those firms providing liquidity could be janky to say the least.

All in all, it's a functional market, as you need speculators and hedgers for a market to work. But again, greed in the forex market is huge as there's always a market open, and the make stock trades look tiny in comparison. (200B for stocks, vs 5T for forex per day)

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RobinsShaman t1_iz0z0xz wrote

An FX swap agreement is a contract in which one party borrows one currency from, and simultaneously lends another to, the second party. Each party uses the repayment obligation to its counterparty as collateral and the amount of repayment is fixed at the FX forward rate as of the start of the contract.

FX swaps have been employed to raise foreign currencies, both for financial institutions and their customers, including exporters and importers, as well as institutional investors who wish to hedge their positions. They are also frequently used for speculative trading, typically by combining two offsetting positions with different original maturities.

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D-Noch t1_iz10ydy wrote

Much appreciated.

Where exactly does the excess debt creep in, though?

Is it that every org is the 1st Party in a bunch of contracts (as well as the 2nd in others), and the 1st Party always borrows more than they lend (so they can the use that money for other purposes, be it speculative or otherwise)?

Or is this an issue of fluctuations over time in forex leading to certain debt being more difficult to repay?

Edit: was thinking about this- is it that the orgs use the repayment obligation OF the counter party, to the primary party, as collateral for additional borrowing?

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Specialist_Pilot_558 t1_iz1aoug wrote

Synthetic shares are a part of the current market. Parasites have rigged the game. It's disgusting

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craneoperator89 t1_iz1zb1w wrote

Luckily they haven’t taken away our ability to directly register our shares in our own names with the transfer agent for a stock or all we would be trading is fake shares of companies and giving them more money for nothing in return. The games about to stop.

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[deleted] t1_iz2x3tq wrote

[deleted]

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craneoperator89 t1_iz2xbv7 wrote

Of all the flavors to choose from you chose salty

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[deleted] t1_iz2z9cx wrote

[deleted]

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craneoperator89 t1_iz31584 wrote

No debt NFT Marketplace Short interest well over 50% for months (still a squeeze play) 60% of the free float locked up

You gonna watch earnings Wednesday evening? You should come learn the other side bc you sound like cokerat cramer lol

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Has_hog t1_iz1iq5p wrote

An 80 trillion blind spot?? Based around the exchange of currency?? Wtf that is insanely stupid and (yet another) recipe for disaster.

For context the total global market of ALL countries , products and services is estimated to be ~25 trillion. There is way too much speculation going on

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Showerthawts t1_iz2fg7n wrote

Easy. Stop letting bankers and banks engage in complete BS and fraud in the form of 'financial instruments' which are just things they make up to commit fraud.

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Atechiman t1_iz2s7ax wrote

But these are all non-bank financial entities (mostly pension funds)

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plopseven t1_iz40kaz wrote

Using obscene amounts of leverage with capital obtained at negative real interest rates relative to inflation by reckless central banks, yes.

There is no “non-bank financial entity” because finance is global.

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Atechiman t1_iz4bzae wrote

I don't know article says non bank entity specifically referencing pension funds. I do know banks are regulated and there other financial institutions that don't have the same restrictions as banks.

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xspree t1_iz13o33 wrote

I’m very interested in trying to make some money on this.

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Nymaz t1_iz1ggey wrote

You'll need to start small. Just borrow a few million from your parents and you're set.

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bumassjp t1_iz15kqc wrote

Yea sure. Totally blind

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deadbeat95 t1_iz3g4iu wrote

This all just sounds like the perfect storm to create The Big Short part 2

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TiramiZeus t1_iz4csgz wrote

He paid off the right people clearly, yeesh.

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oxfordcommaordeath t1_iz7f8bi wrote

Blindspot my ass, multiple subs have actively been calling this out for 2 years.

Regularors willfully ignored this because it directly benefitted them to do so.

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