So US banks owe $176 trillion. Who do the banks owe all this money to?
Themselves and their shareholders they expect us to pay for it!
No, they don’t owe even a fraction of this. In fact, many of these derivatives are “in-the-money”, meaning someone owes them.
To be sure, complicated derivates have caused a lot of trouble in the financial system. However, we need to understand that much of this “notional” value not only isn’t owed to anyone, it never will be.
You also should know there are two sides to each of these transactions. Where one bank has a gain, another has a loss.