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Why $200bln Is A Drop In The Ocean

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Excellent article shows the magnitude of the trouble ahead

http://www.marketwatch.com/news/story/deri...p;dist=printTop

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.

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:

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.

Also, keep in mind that while the $516 trillion "notional" value (maximum in case of a meltdown) of the deals is a good measure of the market's size, the 2007 BIS study notes that the $11 trillion "gross market values provides a more accurate measure of the scale of financial risk transfer taking place in derivatives markets."

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Why? Gross says we are creating a new "shadow banking system." Derivatives are now not just risk management tools. As Gross and others see it, the real problem is that derivatives are now a new way of creating money outside the normal central bank liquidity rules. How? Because they're private contracts between two companies or institutions

hum interesting.

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This ain't no longer about the cost af a shed, sorry house, this is about someting alot more serious, its about this thing they print and whether it will retain what value against what for well into the future, and the future i say along bladdy time?

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  • 294 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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