Today a former White House official and Plunge Protection Team member warned King World News about a terrifying Cyprus-style global endgame.  Former presidential adviser and member of the U.S. President's Working Group on Financial Markets, Dr. Philippa Malmgren, also discussed how corrupt governments will steal money their citizens in a coming Armageddon scenario.
Eric King:  “There is this ongoing fear that another derivatives crisis will unfold, similar to the one which led to the 2008 – 2009 collapse.  Things can go sideways in the derivatives market very quickly.”
Dr. Malmgren:  “Absolutely.”
Eric King:  “Is that the ticking time bomb for 2015?”
Dr. Malmgren:  “Let’s look at the facts:  The value of global derivatives contracts now exceeds more than one quadrillion dollars.  People can’t even understand the magnitude of it.  One of the reasons regulators everywhere have been so insistent that banks raise their capital or liquid cash on their balance sheets is to try to be prepared for the next derivatives crisis.  
So the question is:  Is there enough cash and liquid assets on banks’ balance sheets to deal with that kind of a derivative crisis?  The size of the derivatives market is so massive that banks could be overrun if things got out of control….
Continue reading the Dr. Philippa Malmgren interview below…
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“Also, people believe that if there were another derivatives crisis, the Fed would simply announce more quantitative easing.  We can talk more about this in a bit.
Stunning Price Moves In Key Markets
The other concern is the magnitude of the price moves we are seeing.  The Greek stock market was down 20 percent in a single week in December — at the beginning of this 'Grexit' discussion.  That’s a huge move in a short period of time.  The price of oil has collapsed more than 50 percent in a matter of months.  The Russian ruble collapsed more than 50 percent.  So the world is seeing massive and very rapid price changes.”

Armageddon Scenario
Eric King:  “Will the next derivatives crisis be too big for governments?”
Dr. Malmgren:  “Yes.  This is the famous ‘Too big to save.’  Alan Greenspan talked about this when I worked in the government.  He basically said, ‘Everybody focuses on the too big too fail, but the real question is:  What happens when you are too big too save?’  This is a very serious issue.  The markets will want to believe that the situation can be saved because if it can’t, then we go into some kind of dreadful Armageddon scenario….

Eric King:  “Let’s talk about that Armageddon scenario, Dr. Malmgren.  There is a great deal of concern in the West because bail-ins have been written into law in countries all over the West.  That allows for money to be taken directly from bank accounts Cyprus-style.  Alan Greenspan once gave a speech where five times he talked about creating money ‘without limit.’”

Dr. Malmgren:  “I remember that speech.”

Eric King:  “Greenspan talked about derivatives and the crisis that would arise because the irresponsible behavior by the banks would be backstopped by the taxpayers.  We have already gotten a taste of that in the 2008 – 2009 collapse.  So the concern people have is that the West has now written into law the ability to seize money directly from people’s bank accounts.  What we are essentially saying here is that people’s careful savings of a lifetime could be wiped out in the blink of an eye when the next round of the derivatives crisis hits.”

Corrupt Governments Will Steal From Grandmothers
Dr. Malmgren continues:  “The losses in the financial system are already being passed on to the taxpayers — the grandmothers and the everyday common person.  So, yes, there is a big effort by governments worldwide to move that loss off of their balance sheets and onto the backs of their constituents. 
They are already applying moral suasion to pension funds by convincing them to hold more sovereign debt.  Well, when those bonds eventually sell off, who is going to eat the loss?  It’s going to be grandma.  So I think people need to become more aware of their vulnerability of this process.
Alan Greenspan’s speech was correct — governments can print unlimited amounts of money.  The Federal Reserve still believes they have hardly even started to do that but if they really needed to do it they could.  Because they have been able to introduce so much capital into the markets since 2007 without inflation appearing, they now believe inflation is not even an issue.  But emerging markets are already seeing historic inflation.”
Government Theft Has Already Begun
Eric King:  “The reality is that over one quadrillion dollars of derivatives is too big for governments to backstop.  So governments will have to steal money directly from their citizens, won’t they?”
Dr. Malmgren:  “I hate to tell you this but that’s already begun.  That process is already in place.  Governments deliver less services to their citizens, tax them harder, and their standard of living declines.  The insidious process of high inflation is another way governments are working to get out of their debt problems without it registering to ordinary people that there has been a transfer of wealth.  They are essentially taxing the public to pay for the excesses of the financial system.  In that sense the process has already started, it’s just that it hasn’t registered with people yet.”
Terrifying Cyrpus-Style Endgame
Eric King:  “But the theft of those bank accounts and retirement accounts will take place as the next major leg of the derivatives crisis gets underway.”
Dr. Malmgren:  “Yes.  You are right.  As an example, pension funds will be told through the regulatory process that they should only hold ‘safe assets.’  Safe assets will be defined as sovereign debt.  You can already see this happening right now.  Every pension fund is buying sovereign debt like crazy.
But as sovereign governments default, or interest rates rise, then the losses will be incurred.  So the pensioners will suffer massive losses.  Suddenly 30 percent or more will just be missing from people’s pension funds.  Investors will have to be very savvy to make sure that governments don’t offload their losses onto them.  So the losses will happen the same way they did in Cyprus, it’s just a question of how we see those losses incurred.”