Wednesday, September 17, 2008
SO here we are on the morning of D Day. The world’s major couterparties on the $US455 trillion derivatives market go into technical default and no one is sure what is going to happen.
The likes of Warren Buffett would have it that the defaults triggered by Lehman's implosion would resound fearfully through the multi-trillion-dollar derivatives market, generating a global, capital-burning bushfire in global markets. Then there are those who believe the systemic risk in the $US455 trillion derivatives market has been overcooked. But even those who maintain a less cataclysmic view than Omaha's Oracle accept that a major default event like the collapse of the 158 year old Lehman will result in massive value burn. And there will be hot-spots in unexpected places -- like, for example, a sad selection of deluded Australian councils and public works authorities