In what could be a very huge development in global finance, there is a report out of China that Chinese state-owned companies (which presumably includes all Chinese banks) will be allowed by the Chinese government to renege/default on their derivatives contracts to foreign banks. The links below document that Chinese companies have such huge losses on derivatives contracts that they may simply default on them with the full approval of the Communist Chinese government. Such an action would “void” outstanding derivatives deals and the Chinese companies would clean up their balance sheets as if the derivatives contracts had never even existed.
If the Chinese companies do this, you can be sure that many other nations will follow suit and do the same thing. This would create huge shock waves in international finance as it would devastate the balance sheets of the banks which held the “winning” positions on those derivatives contracts. While the report doesn’t specifically name the “six foreign banks” which would be the losers if China takes such action, the Reuters report names Goldman Sachs, UBS, Morgan Stanley and JPMorgan as banks that declined comment on this major story out of China.
I don’t know if anyone really knows how many derivatives contracts are “out there,” but reports have indicated they total in the 100s of trillions of dollars. In what could be the understatement of the year, one of the links below notes that Chinese companies voiding on their derivatives contracts could cost “banks millions of dollars.” The other Reuters link reports that just 3 Chinese airline companies booked losses of “$2 billion” on “aviation fuel hedging contracts.” If all Chinese companies and banks renege on their derivatives contracts, there could easily be trillions of dollars in losses to the counter-parties in those derivatives contracts.
Those who read my blogs may recall a blog I did not long ago about a Russian national who was arrested trying to leave the USA with “market manipulation” software that reportedly belonged to Goldman Sachs. The report indicated that some of those trade secrets had already been sent abroad to Russia and Germany. China is Russia’s strategic ally so you can be sure that Russia will share with China whatever it found in Goldman Sachs’ “market manipulation” software programs. Maybe China (and other nations) have come to realize that there never was an honest market in derivatives trading. They may logically be wondering if Goldman Sachs (and others?) were using that “market manipulation” software for a long time to ensure outcomes in their favor. The link below includes a suggestion that China should “seek redress in the courts” re: these derivatives contracts. If China did take legal action, one can be sure that Goldman’s “market manipulation” software would be subpoenaed so Chinese lawyers could go over it in great detail to determine its impact on the derivatives trading action.
China has not yet reneged on its derivatives contracts. However, this warning would not have been released unless the Communist Party which governs China had approved its release. If China and other nations do come to the conclusion that the derivatives market was “rigged” from the beginning and they decide to renege on all their derivatives contracts, it could devastate Wall Street, the US dollar and global financial and commercial markets. I’ve been blogging for a long time about the fact that Revelation 17-18 prophesies that the global economic/monetary/commercial will collapse in the latter days and be replaced by a new, global “beast system” which will govern for “42 months” (Revelation 13:5) before it, in turn, is destroyed by the return of Jesus Christ and his heavenly armies (Revelation 19:11-21).
If China and other nations simply renege on their derivatives contracts with Wall Street Banks, it could collapse the entire global market in all derivatives trading and bring about the prophesied collapse of the current global economic system. Please realize that I’m not predicting that this will be the cause of “Babylon the Great’s” fall or that such action is imminent, but if China does renege on all its derivatives contracts, it could be the trigger that fulfills the prophecies of Revelation 17-18. China has now openly warned the USA and Wall Street that it is considering such action. I wonder what concessions China will demand from the Obama administration and Wall Street to be persuaded to avoid (or delay) taking such action? Believers should watch this development very closely!