There is a lot of talk by people who know that there is a coming collapse in the derivatives market. What a lot of folks aren't talking about is the range of options that a collapse can bring.
It could be a house of cards that falls down and leaves nothing. A true worldwide collapse. I think this is unlikely.
It could be a complete devaluation of the Dollar and the start of a reboot of the American financial system. "Nuevo Dollores" so to speak.
Or it could just be another "too big to fail" moment and some behind the scenes deals are made and the public gets screwed.
Or it could be much ado about nothing. After all, this is imaginary money we are talking about. The court system may handle this in the normal fashion of broken contracts and bankruptcy. I mean, 78 Trillion dollars doesn't exist, so it makes sense that as one company folds under and that debt falls into bankruptcy protection that the whole exposure on the derivatives market will be more of a controlled implosion than a sudden crisis.
So what will it really mean? Well I think there is a high likelihood that the dollar will lose a lot of international confidence and suffer as a result. I also think that people who have their money in the stock market will be somewhat insulated as the market increases in value to the same rate that the dollar declines. I think that commodities will be insulated simply because they are commodities.