Tag Archives: market risk

Widespread Derivative Use

The use of derivatives in industry can be used to mitigate risk faced by companies exposed to underlying commodity price fluctuations. However; under the authority of banks blessed with oligopolistic privilege, derivatives can be abused thereby directly jeopardizing the financial system. 

Short selling is the sale of a borrowed security in anticipation of a market price decline.  The trouble with the short sale phenomenon is one of title. Regulators permit the usage of such transactions in absence of security title.  In fact, the owner of the security may or may not be privy to the fact that his / her shares or certificates had been loaned since such are typically held in trust by brokerages. 

What about illiquid commodity markets such as silver? Should banks be permitted to operate on both sides of the same trade such as possessing long interests and short interests at the same time? It would appear counter intuitive to the profit motive but what if there is a macroeconomic strategy at work activated because of market dominance, oligopolistic privilege, and relationship with central bank authorities?

The Gold Anti-Trust Action Committee (gata.org) for a period of 19 years has been asking questions with respect to the legitimacy of all market trades and whether surreptitious activity has been undertaken by elite players to protect their positions.  Some distrust of the monetary system as it exists today obviously has had something to do with the bitcoin and crypto-currency phenomenon.