fyi
The sky is falling!
This is the sort of article that gives fear mongering a bad name.
He does not clearly explain the difference between the notional value of derivatives and the actual amount of money that can be gained or lost.
For example, suppose I bet you a dollar that the Dow Jones Industrials will go down tomorrow. The notional value of this contract would be the amount of money spent buying and selling the 30 Dow stucks, which is billions of dollars even for one day. However, the most I can make or lose on this contract is one dollar.
Now let’s try a real-world example. When Lehmann failed, it failed for $380 billion. There were in fact CDOs outstanding on this debt several times over, or more than a trillion dollars worth of CDOs. However, when the 300-odd major holders of these derivative positions met to settle up, only about $18 billion in actual cash had to be paid out, since each position was heavily hedged.
I knew there was a Liberal in the woodpile somewhere... Nobody EVER explains what that nasty "triggering" event would be. Just like TARP... the sky is falling so pass this crazy legislation that you don;t understand and didn't bother to read. I think this threat is nuts... how many bets on tonight's baseball game? Who knows? But, when the game is over, the market clears real fast...
So - I have been hearing about these things for quite awhile. Why are all governments continuing with them. Why not reel them in, starting like tomorrow? Why do things have to burst? Where are the adults?
Can someone take the Market Oracle out back and shoot it, please?
I swear, it pains me to see otherwise sane people becoming as deranged as the “Oh my God, a car backfired, it’s a sign of the apocalypse!” types. It’s a sickness.
The US economy is not the financial system.
The financial system is ALREADY destroyed, and the sooner it collapses, the better.
The end of this big con won’t destroy the real economy, it will liberate it.
Yes, it's 999,999,999,999,999,999 more than the number of brain cells possessed by the average Market Oracle writer.
The incentives for mischief here are enormous. I doubt it means the end of the world if they all blow up. More likely, Michelle Obama will only be able to take 7 vacations next summer instead of 8.
1. Listed credit derivatives stood at USD 548 trillion;
2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD 596 trillion and included:
a. Interest Rate Derivatives at about USD 393+ trillion;
b. Credit Default Swaps at about USD 58+ trillion;
c. Foreign Exchange Derivatives at about USD 56+ trillion;
d. Commodity Derivatives at about USD 9 trillion;
e. Equity Linked Derivatives at about USD 8.5 trillion; and
f. Unallocated Derivatives at about USD 71+ trillion.
Not counting 32 million years of interest!
What the taxpayer (without consent) bailed out were the counter-parties to the AIG bets. Had AIG failed, and the counter-parties suffered losses, as they should have, the derivatives market would have shrunken pretty fast as the "Oh my God, look at what we lost" factor was appreciated.
Okay. I'll agree that 600 trillion dollars is a frightening number and a quadrillion dollars is a horrifying number. But how does this particular bubble go "pop"? What is the triggering mechanism? What does it look like? How will it play out when it happens?
Stupid article because derivatives are zero sum. Sure, they can break one guy...but that only moves the loser’s money over to the winner.
The same money overall still remains in the economy; it just moved.
Thus, derivatives can’t break the economy....just the losers.
read later