HOW MUCH IN DERIVATIVES, REALLY?June 7, 2013
As most of you know, I enjoy reading the articles of The Daily Bell, and occasionally comment on them here. This week(May 20-24), as I am pre-scheduling blogs well into June when this one will appear, there was a very interesting and thought provoking article at the Bell:
I had to do a double-take: Did I read that correctly? A billion trillion? Uhm... that's 1,000,000,000,000,000,000,000 right? A one or some other coefficient followed by twenty-one zeros? Or one septillion? I read on, and apparently the Daily Bell wasn't exaggerating, for with it's usual tongue-in-cheek humor, it quipped "Not knowing how much of a billion trillion dollar market is unsecured and speculative would seem to be a problem."
Then came the clincher: regulatory capture:
"...consumers should not count on regulation to protect them. Inevitably in modern governance those who are begin regulated end up in control of the regulations."
True enough: we've seen the results of regulatory capture of government agencies in the whole miserable saga of GMOs and the FDA, which is but a rubber stamp for the agribusiness and pharmaceutical corporations.
I had to investigate that number, and fortunately, a commentator on this website was apparently thinking the very same thing, and supplied this link, which, when I read it, induced yet more shock:
Read the end of that first lengthy opening paragraph one more time, and let the figures sink in:
"Right now, the U.S. economy is exhibiting all of the classic symptoms of a bubble economy. You can see this when you step back and take a longer-term view of things. Over the past decade, we have added more than 10 trillion dollars to the national debt. But most Americans have shown very little concern as the balance on our national credit card has soared from 6 trillion dollars to nearly 17 trillion dollars. Meanwhile, Wall Street has been transformed into the biggest casino on the planet, and much of the new money that the Federal Reserve has been recklessly printing up has gone into stocks. But the Dow does not keep setting new records because the underlying economic fundamentals are good. Rather, the reckless euphoria that we are seeing in the financial markets right now reminds me very much of 1929. Margin debt is absolutely soaring, and every time that happens a crash rapidly follows. But this time when a crash happens it could very well be unlike anything that we have ever seen before. The top 25 U.S. banks have more than 212 trillion dollars of exposure to derivatives combined, and when that house of cards comes crashing down there is no way that anyone will be able to prop it back up. After all, U.S. GDP for an entire year is only a bit more than 15 trillion dollars."
This is beyond both criminality and insanity, it is merely criminally insane: the exposure of the top 25 American banks is over fourteen times the entire American gross domestic product for a year.
As if that isn't disturbing enough, consider this:
"And of course the entire global financial system is a giant bundle of debt, risk and leverage at this point. We have never seen anything like this in world history. When you step back and take a good, hard look at the numbers, they truly are staggering. The following statistics are from one of my previous articles entitled "Why Is The World Economy Doomed? The Global Financial Pyramid Scheme By The Numbers"...
"-$70,000,000,000,000 - The approximate size of total world GDP.
"-$190,000,000,000,000 - The approximate size of the total amount of debt in the entire world. It has nearly doubled in size over the past decade.
"-$212,525,587,000,000 - According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.
"-$600,000,000,000,000 to $1,500,000,000,000,000 - The estimates of the total notional value of all global derivatives generally fall within this range. At the high end of the range, the ratio of derivatives to global GDP is more than 21 to 1."
That last number is the staggering figure: one quintillion five hundred quadrillion is the notional value of derivatives, giving that astronomical ratio of 21-1 in terms of derivatives to global gross domestic product.
The best guess - that's right folks, it's a "best guess" - is that the derivatives are now in the quintillions, whereas when the "crisis" broke a few years ago, it was estimated to be in mere quadrillions.
A septillion here, a quadrillion there.... In this context we'd do well to remind ourselves what one of the patriarchs of the self-appointed globaloney wise men said of his class:
"For more than a century ideological extremists at either end of the political spectrum have seized upon well-publicized incidents such as my encounter with Castro to attack the Rockefeller family for the inordinate influence they claim we wield over American political and economic institutions. Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as 'internationalists' and of conspiring with others around the world to build a more integrated global political and economic structure--one world, if you will. If that's the charge, I stand guilty, and I am proud of it." -Quotes from David Rockefeller's Memoirs (Random House, New York, 2002) Chapter 27, pages 404 and 405
And let's not forget this Rockefailure gem from the 1991 Bilderberg meeting, calling for "a supranational sovereignty of an intellectual elite and world bankers, which is surely preferable to the national auto determination practiced in past centuries." (q.v. my Babylon's Banksters, p. 59).
One quintillion, five hundred quadrillion in derivatives is preferable? His own words condemn him, and his fellow "global planners": they're simply nuts. Evil? yes. Well-intentioned? Maybe. Power-mad? Definitely. But most certainly, just plain nuts. They've been running this show, and the verdict is in. They're just plain nuts.
See you on the flip side.