Re: derivatives and currencies - implications for kapoom?
Being short jpm is being short the us govt.
I think a key feature of derivatives is their 'moneyness' or lack thereof; a large part of what i called the sucking sound was the evaporation of this quality: the requirement for posting collateral for cds being introduced for example.
Derivatives allow the synthetic manufacture of an entity as tradeable as the underlying and with the same characteristics.
I do feel interest rate and fx swaps are key in maintaing the current control structure but I am not clear how exactly. I suspect the use of the dollar as a unit of account in such contracts has contributed to dollar demand at times of stress.
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