Derivatives Nuke Time Bomb

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hpernar's picture
hpernar
Status: Member (Offline)
Joined: Oct 7 2008
Posts: 8
Derivatives Nuke Time Bomb

I would like to discuss the destructive nature of derivatives, given the following (now outdated) information :

  • 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

Now, this number is something that has no parallel in the history of the world and frankly - it scares the s..t in me. Who knows how actually this market is big now and how/when it would explode on a unprecedented/unimaginable scale...

Ray Hewitt's picture
Ray Hewitt
Status: Gold Member (Offline)
Joined: Apr 5 2008
Posts: 458
Re: Derivatives Nuke Time Bomb

I see numbers cited from $600 billion to 1.25 quadrillion or 1,250 trillion dollars. Whichever is closest to being correct, it's over four times the world's total Gross Domestic Product. They've been exploding, starting small with Bear Stearns and picking up energy with AIG's implosion. When it reaches critical mass is not predictable with any accuracy.

Source: http://www.nowandfutures.com/derivatives.html

I find Jim Sinclair of http://jsmineset.com/ one of the best sources on this matter.

memorrison's picture
memorrison
Status: Bronze Member (Offline)
Joined: Apr 16 2008
Posts: 90
Re: Derivatives Nuke Time Bomb

Our Government puts out it's own report on derivatives - but has done nothing to regulate these "bets".... I would guess that 80% of the people in Congress have no idea our own Government puts this report out.  Scary numbers..

http://www.occ.treas.gov/ftp/release/2008-115a.pdf

Look at the second quarter.  Derivatives activity increased and only 5 companies had 97% of all derivatives in America. 

You only need to read the first two pages as an overview, then jump to 24 and 25 - those pages list the companies and the % of credit to capital. Absolutely staggering!

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