The reason that derivatives are dangerous for the financial system, especially banks, is that it is fundamentally speculation with the use of borrowed money. During a financial crash a derivative may also crash demanding the banks pay out money which they don’t have on hand as an emergency fund. A chain reaction of bankruptcies can exist with many banks going under and if they are too big to fail then the taxpayer foots the bill and a depression is a realistic possibility.

If you liked this evergreen truth blog then read more of them, about 5000 so far, or read one or more of my evergreen truth books, especially EVERGREEN TRUTH, rays of truth in a human world filled with myths and deceptions.

For a complete readily accessible list of blogs and titles go to twitter.com/uldissprogis.


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