The Derivatives Time Bomb
Picked this one up on MarketWatch after a tip off from a friend… w o w!
Derivatives are the new ticking time bomb - MarketWatch
Data on the five-fold growth of derivatives to $516
trillion in five years comes from the most recent survey by the Bank of
International Settlements, the world’s clearinghouse for central banks
in Basel, Switzerland. The BIS is like the cashier’s window at a
racetrack or casino, where you’d place a bet or cash in chips, except
on a massive scale: BIS is where the U.S. settles trade imbalances with
Saudi Arabia for all that oil we guzzle and gives China IOUs for the
tainted drugs and lead-based toys we buy.
trillion in five years comes from the most recent survey by the Bank of
International Settlements, the world’s clearinghouse for central banks
in Basel, Switzerland. The BIS is like the cashier’s window at a
racetrack or casino, where you’d place a bet or cash in chips, except
on a massive scale: BIS is where the U.S. settles trade imbalances with
Saudi Arabia for all that oil we guzzle and gives China IOUs for the
tainted drugs and lead-based toys we buy.
To grasp how
significant this five-fold bubble increase is, let’s put that $516
trillion in the context of some other domestic and international
monetary data:
significant this five-fold bubble increase is, let’s put that $516
trillion in the context of some other domestic and international
monetary data:
-
U.S. annual gross domestic product is about $15 trillion
-
U.S. money supply is also about $15 trillion
-
Current proposed U.S. federal budget is $3 trillion
-
U.S. government’s maximum legal debt is $9 trillion
-
U.S. mutual fund companies manage about $12 trillion
-
World’s GDPs for all nations is approximately $50 trillion
-
Unfunded Social Security and Medicare benefits $50 trillion to $65 trillion
-
Total value of the world’s real estate is estimated at about $75 trillion
-
Total value of world’s stock and bond markets is more than $100 trillion
-
BIS valuation of world’s derivatives back in 2002 was about $100 trillion
-
BIS 2007 valuation of the world’s derivatives is now a whopping $516 trillion
Moreover, the folks at BIS tell me their estimate of $516 trillion only
includes “transactions in which a major private dealer (bank) is
involved on at least one side of the transaction,” but doesn’t include
private deals between two “non-reporting entities.” They did, however,
add that their reporting central banks estimate that the coverage of
the survey is around 95% on average.
includes “transactions in which a major private dealer (bank) is
involved on at least one side of the transaction,” but doesn’t include
private deals between two “non-reporting entities.” They did, however,
add that their reporting central banks estimate that the coverage of
the survey is around 95% on average.