Derivatives have as much reality as a casino bet. In a mathematically determined game, with the odds with the house, the house will always come out ahead at the end of the year. However, that bet in and of itself has no intrinsic value to anyone.

Derivatives were bets placed on bets placed on bets, each concerned with decreasing overall risk for the house. They functioned fairly well for four decades in doing just that and the house (banks, brokerages and hedge funds) all got quite fat on them, with numbers going up year after year, even though those numbers represented enormous debt running all through the game.

However, those bets, placed years ago with real money, are being seen now as losing hands. The real money is long gone, spent by the house on new carpeting and free buffets for the suckers who were enticed to go into debt to get into the game. Since then, they've played a game of bidding up those bets with money they created out of thin air through leveraging debt, themselves.

The suckers have nothing to show for it but debt the house was counting on to keep the game going. The house has nothing but a bunch of worthless cards and the debt it leveraged in order to bluff the game. Basically, the money is gone, the Emperor is naked as a jaybird, and nobody can hide the fact any more.