“Mr. Moriarty and I had a serious disagreement extremely early in the recognition of the severe problems that derivatives and their financial interdependence threatened the financial community based on lack of full grasp of the impact of bankruptcy a complexity of contract law thereupon many years back. His insistence that derivatives net out to zero was correct in a theoretical and perfect world in which all parties to all derivatives performed as to what and when the contract called for. He even had a professor write an article to sustain his view. What they both missed was the critical financial factor and entirety of the problem OTC derivatives have landed us with in the trillions. His denial of notional value transmuting to total true value in default is under contract law simply untrue. Notional value will become full value at that moment in time they are called on to perform. If either party can’t come up with the huge funds then called for or physical gold, then bankruptcy of one party leads to the initial default. The danger lies should this default be of size to become systemic in nature. If either party to the Comex contract, buyer or seller, fails to perform according to the varied contract stipulation, the agreement under contract law, default occurs and the agreements in nominal value becoming real cash value which is an enormous financial swing. It is in the present discussion to recognize that default occurs at the point of non-performance of the contract. All that Force Majeure does in the Comex contract is to outline a possible form of a solution to which there is no guarantee of.

Under the logical outline by Bill of events you can anticipate, the Comex contract will default by not being able to perform in the contract manner called for. As far as the called for

remedy by the halt that Force Majeure it is also theoretical in a perfect world. This is exactly what Bear Sterns and Lehman Brothers faced for the same reason, which broke them both. Bill’s argument is totally correct in the real world of finance”

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome bholter@hotmail.com