The End Game | Raoul Paul
There is much talk about the end of things as we know it. Raoul Pal founder of Global Macro Investor “previously co-managed the GLG Global Macro Fund in London for GLG Partners (ht ZeroHedge) and wrote this straightforward piece..
The single piece of evidence in this piece is one that I have mentioned here often. That is the $600/ 700 trillion in derivatives that exist. The set of financial hedges that represent 10 x world GDP.
Right after the crisis began there was much talk and effort focussed on unwinding those contracts. not only did that not happen, they have grown from 600 then to 700 now.
We just had JP Morgan announce a mark to market loss of $2Bn related to derivative risk of about $100 trillion. It is illustrative that by holding about 17% of world derivatives in on institution we can easily view the extent of the risk. However the fact that the rest is spread across multiple institutions is no particular security blanket, The amount is so large and all banks capital is so low, a whisper in this market will create a domino effect.