Monday, Apr 21, 2008
To bail out a $681 trillion derivative scheme with taxpayer money is obviously impossible.
Web of Debt: CREDIT DEFAULT SWAPS: DERIVATIVE DISASTER DU JOUR
When the smartest guys in the room designed their credit default swaps, they forgot to ask one thing – what if the parties on the other side of the bet don't have the money to pay up?
In December 2007, the Bank for International Settlements reported derivative trades tallying in at $681 trillion – ten times the gross domestic product of all the countries in the world combined. Somebody is obviously bluffing about the money being brought to the game, and that realization has made for some very jittery markets.
To bail out a $681 trillion derivative scheme with taxpayer money is obviously impossible. As Michael Panzer observed on SeekingAlpha.com:
As the slow-motion train wreck in our financial system continues to unfold, there are going to be plenty of ill-conceived rescue attempts.
13 Comments
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1. Nobby1963 said...
If this is true then this is scary stuff and we are in very scary times ???? God help us??
2. This comment has been removed as it was found to be in breach of our Blog Policies.
3. malct said...
http://globaleconomicanalysis.blogspot.com/2007/12/derivatives-trade-soars-to-record-681.html
http://siliconinvestor.advfn.com/readmsg.aspx?msgid=24439149
http://eliteeservices.blogspot.com/2007/12/derivatives-soar-27-to-681-trillion.html
http://seekingalpha.com/article/56982-derivatives-trade-soars-to-record-681-trillion
http://www.bloomberg.com/apps/news?pid=20601085&sid=ad71potU0EbM
Derivative Trades Jump 27% to Record $681 Trillion (Update1)
By Hamish Risk
Dec. 10 (Bloomberg) -- Derivatives traded on exchanges surged 27 percent to a record $681 trillion in the third quarter, the biggest increase in three years, the Bank for International Settlements said.
I think this part of it might just be true!
4. yorkshireman said...
If these really are the smartest guys in the room, then who are the fools ? The rest of us maybe, or that is how it seems. Any attempt to correct it by throwing taxpayers money at it is like farting in a thunderstorm - (as my old dad was fond of saying).
5. General Melchett said...
Ill-concieved rescue attempts? Hmm, what COULD they be thinking of.......
Oi, Darling..... NO!!!!!
6. malct said...
Since my editorial 'Hey Buddy, can you spare $1,000 trillion?' written in October 2007, the derivatives market grew from 516 to 681 trillion!
Meanwhile the global stock market cap is approximately $51 trillion. Because derivatives are similar to insurances against value depreciation, how can we have such a big gap?! We are in big trouble, guys!
Martin Frost - Debt Matters - search here
http://www.martinfrost.ws/htmlfiles/mar2008/debt_matters.html
7. Rjb said...
remember that this figure, if accurate, is a sum of magnitudes. Some of these derivatives would cancel out. For example, a derivative that pays when oil goes up is mutually exclusive with respect to one that pays out if oil goes down. It's a vector sum. Of course, the chances of it all cancelling out in a nice way that doesn't lead to a cascade of insolvencies would be a bit of a fluke!
8. James said...
C'mon people, get in the game here. Please understand that virtually no derivatives settle. The way a derivative is closed is to buy/sell the exact opposite of it. So, if I buy CDS and want to close my position, I'll sell the equivalent CDS.
What this means is that the total volume of CDS will increase massively - but what matters is the NET outstanding position. Unfortunately, as it's a private matter, it's really difficult to find out the size of this!
9. plato said...
Great article that brings home the huge scale of debt created by the private banks that we are endlessly compelled to pay for, but this information and it's message needs to be seen and published widely in everyday language. How this will happen I just don't know, and this is the frightening part for me.
Dr. Chris Martenson's (thanks s2r1) 'algal bloom' has probably reached its limit.
10. sold 2 rent 1 said...
plato,
In order to reach "global enlightenment" or co-creation we have to abandon a debt-based monetary system.
This will probably be in the "fifth night" that occurrs in the summer of 2011.
11. malct said...
or simply go to Totnes this weekend
www.thealternativeview.co.uk
www.foodcode.blogspot.com
www.foolmeonce.co.uk
Turning the World Upside-Down - The Invisible World Government . and how to stop it Civic Hall 11:30am Saturday 26th April 2008
Since the First World War an ambitious project has been put in place for the world to be governed from behind the scenes.
Weak national leaders have increasingly distanced themselves from parliaments and handed power over to totalitarian colonial groups the public, and often the press too, have never heard of.
The end result is a rudderless media and national and government policies that work against the interests or desires of ordinary people . and all in the name of democracy!
But all is not lost. A wave of resistance and awareness of the new Global Agenda is sweeping the world and the plans of the NeoCon madmen are going awry.
james, james are you there?
12. malct said...
james you haven't got a password
where is your commitment?
13. malct said...
sorry james you deserve more consideration, let's be more positive, you said - Unfortunately, as it's a private matter, it's really difficult to find out the size of this!
alarm bells flashing red lights - or no pulse!
a private matter? one that effects everybody in the world - yea right - heart beats brain thinks. come on. review!