Posted on 10/21/2008 4:42:52 PM PDT by Lorianne
This single statistic has boggled my mind because it puts into perspective the enormous size of the derivatives bubble. DK Matai, chairman of the ACTA Open in his article The Invisible One Quadrillion Dollar Equation — Asymmetric Leverage and Systemic Risk writes:
According to various distinguished sources including the Bank for International Settlements (BIS) in Basel, Switzerland — the central bankers’ bank — the amount of outstanding derivatives worldwide as of December 2007 crossed USD 1.144 Quadrillion, ie, USD 1,144 Trillion.
The population of the whole planet is about 6 billion people. So the derivatives market alone represents about USD 190,000 per person on the planet.
The value of the derivatives market is 22 times the GDP of the entire world.
This financial crisis is not about sub-prime mortgages or credit swaps. The geniuses of Wall Street have managed to create a bubble that is way beyond any real values.
Consider this:
The real estate of the entire world is valued at about USD 75 trillion.
The world stock and bond markets are valued at about USD 100 trillion.
Add up all the real estate value in the world and all the value of all public businesses in the world and you get to $175 trillion. This is just 15 per cent of the value of the derivatives market.
What’s going to happen as this bubble unravels? What’s going to happen as the value of the underlying securities on which the derivatives are based upon devalue further?
You can’t bail this bubble out. There is not enough money in the world to bail this out. The US money supply is about $15 trillion, 1.3 per cent of the bubble. I don’t have figures for the rest of the world money supply but whatever it is it might add up to a whopping 10 per cent of the derivatives bubble.
Unbelievable. All of this was done in the shadow financial markets, completely unregulated.
Sure it wasn't the Bank for Settlements (BS). Doesn't seem to meet the smell test.
Nam Vet
After taking a quick at the web page this came from my instinct is this is a load of crap. But welcome insights from others.
Well, that’s presuming the big players actually get to collect on the Credit Default Swaps they bought. It’s far more likely they are going to told by the government: “Ha, ha, sucker, your lottery numbers hit, but since you bought the instrument without using a regulated exchange it is null and void and you get nothing!” than it is the average citizen of Swaziland is going to be walking behind a plow for 2,000 years to pay off Goldman Sachs. ;)
We’re dooomed. We’ll never make it.
Just dust in the wind. Total BS.
My very basic understanding is that they were kinds of “insurance” that would “spread the risk”. They would be written as a kind of bet, i.e. if this company can’t pay up, I will. Underneath the derivative was the money flow of mortgages that got “bundled” together. These credit derivatives were to “protect” the flow of payments on those mortgages. Sometimes people were writing these on companies they had no stake in. Total unregulated. These were private agreements, and the people writing them got payed tons in bonuses, and the investment banks looked very good getting all kinds of fees selling these crappy pieces of paper. Paper on top of more paper, with no productive value at all.
And if I got anything wrong, I am sure others will add to this discussion.
They made their own mess. Nobody owes them nothing except the ones who hatched these stupid derivatives schemes. Let them fight amongst themselves.
My solution: turn NYC into the US max security prison and throw all the f@cking bailed out bankers, sub-prime mtge brokers, and derivatives scam artists and the only ones who have a chance to get out are the ones that survive Thunderdome 3 times.
It may sound corny and cobbled together, but face it, MY solution is far more entertaining, metes out justice, profitable (think of the broadcast rights) and doesn’t cost taxpayers one F@CKING cent.
from wikipedia:
Credit default swaps are the most widely traded credit derivative product...On September 23, 2008, Christopher Cox, Chairman of the U.S. Securities and Exchange Commission, placed the worldwide CDS market at $58 trillion, and stated it was “completely lacking in transparency and completely unregulated.”
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I’ve read estimates that it’s higher and lower than stated here. Hopefully the Chicago Mercantile Exchange (CME) will create a market for this instrument, thereby taking away some of the risk. Still touch and go as far as the market. I’d watch 3month LIBOR rates which are still HIGH!!! If they come back to earth banks will start lending to one another again...if not, we’re in big trouble.
IMHO, Obama is the candidate of the overseas interests that hold our debt.....
Ha! I think John Carpenter already made that movie.
Good idea though.
I merged “Escape from New York” with the Thunderdome from Mad Max, and then, they not only have to survive the Thunderdome once, but 3 times.
Then they get a CHANCE at leaving. That’s when the RUNNING MAN part of the show kicks off. They get hunted by a team of elite killers and if they can survive for 24 hours and make it to one of the 50-foot fence border gates by then, alive, they get out.
In simplest terms, a "side bet".
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