Derivatives are going to take a lot of people down as Europe collapses. J.P. Morgan is just the first of many investors that will lose billions on “bad bets” which are a code for the heavily leveraged derivative market.

From WSJ:

The losses stemmed from wagers gone wrong in the bank’s Chief Investment Office, which manages risk for the New York company. The Wall Street Journal reported early last month that large positions taken in that office by a trader nicknamed “the London whale” had roiled a sector of the debt markets.

The bank, betting on a continued economic recovery with a complex web of trades tied to the values of corporate bonds, was hit hard when prices moved against it starting last month, causing losses in many of its derivatives positions. The losses occurred while J.P. Morgan tried to scale back that trade.

J.P. Morgan was willing to take these risks because their losses have been socialized by government policy while profits are still private. In other words Liberal corporatism has created a system where the tax payers pick up the tab for these bad investments – no doubt purposefully so that we began clamoring for true nationalization. The reality is that we cannot afford to pay off these trillions owed in the derivative market so look for our slow motion decent into third world status to pick up steam in the coming months as more banks need “bailouts” from a broke American public.