The Bankwatch

Tracking the consumer evolution of financial services

How much outstanding in derivatives in the world? | $ 684 trillion

It is impossible to comprehend this amount of money.  $531 UPDATE $684 trillion represents 3 or 4 times the combined value of the worlds equity markets, bond markets, and world GDP.  It is a stunning number.

There is a possibility that we need to add in the combined value of homes and other assets in the world to come to terms with the number, but then we risk double counting assets which are already valued in equity markets.  Need to think that through some more.

This can only be described as ponzi money – money that is levered and based on multiplying and levering other money.  The underlying assets have been long forgotten.  This remains the unsaid problem with banks, and I believe represents a large part of why banks are not trusting each other yet.

That $531 $684 trillion represents off balance sheet lending by banks.  Each contract in those derivatives are guaranteed by a bank somewhere.  If added to bank leverage, banks would be bankrupt.

More on this as I root around.  Meantime here is the data from ISDA since 1987 to first half of 2008.

isda-market-survey-historical-data

UPDATE:  Information from Bank for International Settlements where they track a more complete view of Derivatives.

BIS http://www.bis.org/statistics/otcder/dt1920a.pdf

Written by Colin Henderson

February 27, 2009 at 03:28

Posted in Uncategorized

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3 Responses

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  1. Good point. There millions made doing nothing more than scalping prices adding no value what so ever. Ponzi money indeed

    HJalmar

    February 28, 2009 at 01:21

  2. […] Colin Henderson schrijft er hier over op z’n blog. Colin noemt het Ponzi money. Het geld vertegenwoordigt namelijk geen onderliggende waarde meer. En dat is waarschijnlijk precies de belangrijkste reden waarom banken elkaar nog niet vertrouwen. De waarde staat namelijk wel op de balans bij de banken. Een derivaten contract wordt namelijk altijd gegarandeerd door een bank. Als deze zeepbel nog leeg moet lopen dan zijn alle banken failliet… […]

  3. […] global problem of derivatives which are still over $600 trillion exists because those instruments were a result of real assets being dissected into different […]


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