/>
X

OMG: The derivatives bubble = $190K per person on planet

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.
tom-foremski.jpg
Written by Tom Foremski, Contributor on

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.

- - -

Please see DK Matai:

The Invisible One Quadrillion Dollar Equation -- Asymmetric Leverage and Systemic Risk

Why are Markets still Falling? The Tsunami caused by Derivatives and Deleveraging

Related

Are you ready for the worst Economy Class airline seats in the world?
airline-seats.jpg

Are you ready for the worst Economy Class airline seats in the world?

Business
Microsoft Azure-certified roles are well-paid, and you can study for certification for $39
replace-this-image.jpg

Microsoft Azure-certified roles are well-paid, and you can study for certification for $39

Deals
Here's how Apple tells if you've dropped your iPhone into water
Liquid Contact Indicator stickers

Here's how Apple tells if you've dropped your iPhone into water

iPhone