The Phaserl


A Day Of Reckoning For The Euro Has Arrived: $26 TRILLION In Currency Derivatives At Risk

by Michael Snyder, The Economic Collapse Blog:

This is the month when the future of the eurozone will be decided.  This week, Greek leaders will meet with European officials to discuss what comes next for Greece.  The new prime minister of Greece, Alexis Tsipras, has already stated that he will not accept an extension of the current bailout.  Officials from other eurozone countries have already said that they expect Greece to fully honor the terms of the current agreement.  So basically we are watching a giant game of financial “chicken” play out over in Europe, and a showdown is looming.  Adding to the drama is the fact that the Greek government is rapidly running out of money.  According to the Wall Street Journal, Greece is “on course to run out of money within weeks if it doesn’t gain access to additional funds, effectively daring Germany and its other European creditors to let it fail and stumble out of the euro.”  We have witnessed other moments of crisis for Greece before, but things are very different this time because the new Greek government is being run by radical leftists that based their entire campaign on ending the austerity that has been imposed on Greece by the rest of Europe.  If they buckle under the demands of the European financial lords, their credibility will be gone and Syriza will essentially be finished in Greek politics.  But if they don’t compromise, Greece could be forced to leave the eurozone and we could potentially be facing the equivalent of “financial armageddon” in Europe.  If nobody flinches, the eurozone will fall to pieces, the euro will collapse and trillions upon trillions of dollars in derivatives will be in jeopardy.

According to the Bank for International Settlements, 26.45 trillion dollars in currency derivatives are directly tied to the value of the euro.

Let that number sink in for a moment.

To give you some perspective, keep in mind that the U.S. government spends a total of less than 4 trillion dollars a year.

The entire U.S. national debt is just a bit above 18 trillion dollars.

So 26 trillion dollars is an amount of money that is almost unimaginable.  And of course those are just the derivatives that are directly tied to the euro.  Overall, the total global derivatives bubble is more than 700 trillion dollars in size.

Over the past couple of decades, the global financial system has been transformed into the biggest casino in the history of the planet.  And when things are stable, the computer algorithms used by the big banks work quite well and they make enormous amounts of money.  But when unexpected things happen and markets go haywire, the financial institutions that gamble on derivatives can lose massive quantities of money very rapidly.  We saw this in 2008, and we could be on the verge of seeing this happen again.

If no agreement can be reached and Greece does leave the eurozone, the euro is going to fall off a cliff.

When that happens, someone out there is going to lose an extraordinary amount of money.

And just like in 2008, when the big financial institutions start to fail that will plunge the entire planet into another major financial crisis.

So at the moment, it is absolutely imperative that Greece and the rest of the eurozone find some common ground.

Unfortunately, that may not happen.  The new prime minister of Greece certainly does not sound like he is in a compromising mood

Greece’s new leftist prime minister, Alexis Tsipras, said on Sunday he would not accept an extension to Greece’s current bailout, setting up a clash with EU leaders – who want him to do just that – at a summit on Thursday.

Tsipras also pledged his government would heal the “wounds” of austerity, sticking to campaign pledges of giving free food and electricity to those who had suffered, and reinstating civil servants who had been fired as part of bailout austerity conditions.

Prior to the summit on Thursday, eurozone finance ministers are going to get together on Wednesday to discuss what they should do.  If these two meetings don’t go well this week, we could be looking at big trouble right around the corner.  In fact, Greece is being warned that they only have until February 16th to apply for an extension of the current bailout…

Euro zone finance ministers will discuss how to proceed with financial support for Athens at a special session next Wednesday ahead of the first summit of EU leaders with the new Greek prime minister, Alexis Tsipras, the following day.

However, the chairman of the finance ministers said the following meeting of the Eurogroup on Feb. 16 would be Greece’s last chance to apply for a bailout extension because some euro zone countries would need to consult their parliaments.

“Time will become very short if they (Greece) don’t ask for an extension (by then),” said Jeroen Dijsselbloem.

The current bailout for Greece expires on Feb 28. Without it the country will not get financing or debt relief from its lenders and has little hope of financing itself in the markets.

And as I mentioned above, the Greek government is quickly running out of money.

Most analysts believe that because of the enormous stakes that one side or the other will give in at some point.

But what if that does not happen?

Personally, I believe that the eurozone is doomed in the configuration that we see it today, and that it is just a matter of time before it breaks up.

And I am far from alone.  For example, just check out what former Fed chairman Alan Greenspan is saying

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16 comments to A Day Of Reckoning For The Euro Has Arrived: $26 TRILLION In Currency Derivatives At Risk

  • Hannon

    I hope this isn’t just theater and the Greeks tell the EU and banksters to pound sand because they’re not getting anything, reinstate the Drachma, repatriate all their islands and infrastructure, then form a military alliance with Russia. I’d rather see them go solo with their military but they’ll just get Ukrained and rolled over without Russian help.

  • Activisor

    The EU is an institution set up for the elites and run by the elites. Its’ unelected bureaucrats are no more than mafia like criminals carrying out grand larceny on sovereign nations. I welcome the collapse of the EU and look forward to a new financial paradigm based on ethics, morality and justice. Greece is just the beginning.

  • Petedivine

    I won’t shed a tear if all the big banks tied to Euro derivatives go down too. I am certain there would be more then a few large American banks part of that crowd.

  • Windrunner56

    Wake me up, I must be dreaming!!! If these two shining stars (PM & Fin Min) stick to their guns they will take down the Euro. All the world is watching (at least outside the US – The Grammy’s were on last night you know!!, and Kim Kardashian got her hair cut), and the Financial system designed by bankers for bankers, will fall like building 7!!! Only this one will be real, caused by financial terrorism.

    Another banker at J.P. Morgan suicided himself again last week. I can only imagine how things will play out if the Euro Collapses.

  • dan


  • dan

    PS….and to think that it would take a leftist to correct monetary reform….wtf

  • rl

    I always think iceland. Granted they never bit the hook and told em to pound sand from the start but how hard was it? Greece and its new man are being massaged and headlined kinda tells me they/he might very well be shopping and looking for the best deal they can land. When you got the leverage use it for all its worth.
    By that I mean one might do well to remember or realize that these politicians ALWAYS get paid… arnold in ca would not say a peep about global warming, barry shows up, ca (suits waving flags) gets 10bil from fed, arnolds at the poster board with his pointer talking abou how ‘global varming vill kill you’ the next day…
    So is pain of a crash any less painful than endless slavehood for greece?
    Kinda like a putin too. How hard would it really be to tell his central bank owned by the same jews who own ours to beat it, if he is so pro russia and its people and in a fight to the death with the neo/banker scum there and everywhere? Who do you fear when the fight is supposedly on already and you have control of the guns and thugs in your own country? Gold backed this and that doesnt change anything when a bank of crooks still owns it all but does wipe out most of humanities so called money and brings out real chains.
    I know this may sound to simplistic as bombs fly when you piss em off and we choose to see politik and certainly money as soooo complicated, but bombs are gonna fly anyway at the end of the day so whos ass are they really worried about? Because laws are no different than fiat; pieces of paper with fancy writing all over them ordained by somebody with power over YOU.

  • Chem Trail Truther

    Imminent euro collapse has the hedge fund mgrs and their govt counterparts scurrying
    for their hideouts. Liquidate the ass(ets) of just 3 of them, convert to silver
    coinage, and use that to restart an organic economy in Greece. Ask Russia for
    protection from imminent bankster invasion. Go out with dignity.

  • gary h.

    the world financial collapse will happen & must happen..& it may as well be now,& get it over with..

    let the game of high stakes derivatives chicken begin..

  • Gnostic

    We’re Greeks, we dance !!! Final “Cheesburger” sketch from SNL.

  • I did not think in my lifetime I would see a breakup of the european union, but there is a lot of discontent in the structure, and there has always been a lot of bad blood between european neighbors in a political sense. In a cultural sense, they get along, In the political, not so much.

  • Peter de Luca

    The solution is for the EU and Greece to agree to having Greece just pay the interest on the loans for an extended number of years. It that way, Greece continues to abide with the policies of the EU without experiencing the punishing aspects of that policy. This will allow Greece to get back on its feet again.

  • Rainmaker

    Is it only me, or does anyone else find the irony in the fact that a new group of Communists is taking on the Fascist Central Bankers? Tis a bit of a cooinkydink, don’t you think?

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