Has the derivatives volcano already begun to erupt?
“Hedging the foreign exchange risk in this half-trillion-dollar per year business has exhausted the balance sheet of the global banking system. That explains a large part of the jump in the US 10-year note yield to 3.2% last Friday from 2.85% in early September. Hedging the foreign exchange risk in these massive flows created a derivatives mountain, and it has started to spew smoke and lava.“
USAGOLD note: We mentioned derivatives earlier today (please scroll). This article zeroes in on one major area of concern as outlined in the snippet above. Remember, this is only one area of concern among many. . . albeit a large one.