Tuesday, March 11, 2008
Buffett and Gross warn: $516 trillion bubble is a disaster waiting to happen
Let's put that $516 trillion in context of some other monetary data: *U.S. annual gross domestic product is about $15 trillion. *World's GDPs for all nations is approximately $50 trillion. This cascading "domino effect" was brilliantly described in "The $300 Trillion Time Bomb: If Buffett can't figure out derivatives, can anybody?" published early last year in Portfolio magazine, a couple months before the subprime meltdown. Columnist Jesse Eisinger's $300 trillion figure came from an earlier study of the derivatives market as it was growing from $100 trillion to $516 trillion over five years. Eisinger concluded: "There's nothing intrinsically scary about derivatives, except when the bad 2% blow up." Unfortunately, that "bad 2%" did blow up ...subprime mess"