Imagine the suffering caused by trying recoup the losses incurred by the rich who invested in derivatives. Imagine the scale of global inflation that bailing out Wall Street will cause.
http://www.youtube.com/watch?v=zM79QpaxvOs
One quadrillion. That’s 1,000,000,000,000,000 — one plus 15 zeroes, or one thousand trillion. It is incomprehensible. And that’s what’s terrifying. This summer, the Bank for International Settlements, the bank for the world’s central banks, estimated that the face value of derivatives floating around the world is $1.14 quadrillion. Derivatives are incredibly complex securities whose value is derived from some asset such as a bond, a stock, or a currency. They are used to bet on the weather and upcoming inflation, among many things. But derivatives aren’t really assets; they are crapshoots on the value of the underlying securities — a wager on another wager. They are based almost completely on borrowed money. And all too many are held by the nation’s largest banks and investment banks — yeah, one of those places where you may have parked your money.
http://www.sandiegoreader.com/news/2008/sep/17/city-light-1/
The notional value of all outstanding derivatives now totals approximately $1.144 QUADRILLION.
This appears to be Bank of International Settlement Spin to announce
the largest gain in derivatives outstanding since they started to
report. As of the last report it appeared that both listed and OTC
derivatives was under $600 trillion. Now listed credit derivatives
alone stood at $548 Trillion. The OTC derivatives are shown as $596
trillion notional value, as of December 2007. One can only imagine what
number they are at now.
http://www.politicsandcurrentaffairs.co.uk/Forum/peak-oil-economics-environment/49278-total-notional-value-derivatives.html
It's a lotta figures. It's mindboogling. It's scary. It's incomprehensible. But i will try to make it simpler to help more understand.
Imagine a world without money. Kuwait has a barrel of oil to sell to US. US digs up 3 nuggets of gold. Both agreed to the VALUE and transacts.
This is what trade at its basic level is all about - goods exchanged for an agreed upon value.
Earth has much resources and each time it is harvested or extracted, it has a value accepted by a majority of humans since civilisation begun. The standard in past centuries had been trust in gold.
In time, gold proved cumbersome and dangerous to carry around, so promissory notes - money, was used, in ancient civlisations such as China and India.
As civilisation progressed, money could be printed and broken down to smaller denominations, but each paper or coin is back by gold. The more gold extracted or robbed, as during colonnialism, the richer the country became.
Those countries without gold, accepted promissory notes issued by reputable banks for their goods and in turn, the more promissory notes they hold, the richer their country became when they either exchange it for gold or use it to trade for other stuff. Singapore, an non-resource rich country, is an example.
The value of the promissory note, which is now the US dollar which is commonly used in international trade, does not stay the same forever, simply because earth resources are continually being extracted and harvested.
For example, yesterday US extracted 1 nugget of gold = value $1, so $1 is printed. TOday, another nugget is extracted, total 2 nugget of gold in the treasury. By right the value of US$1 is now today US$2, but instead, it print one more US$1 dollar note for circulation.
No devaluation here or causing major confusion in the international market on the valuation of the dollar. ( This is simply explained, but in actual fact, there are many international mechanism and treaty to be honoured before even 1 note can be printed.)
Therefore, over time, as more Earth's resources get dug up or harvested, ever since civilisataion began, there will be more promissory notes printed. A century ago, a billion dollars is mindboogling, but today, a trillion is nothing. We had progress.
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It looks crazy - quadrillion dollars! But in truth, it is not surprising.
Even though our global economic output is only $60trillion, it is only for 1 year. How many years had passed since civilisation began?
Not to forget, those assets sitting in banks are properties, with 'mark to market' valuation meaning today's prices. Calculate the amount of properties and land holdings in the world and quadrillion dollars is not as scary as before.
Just like Singapore, our assets is not just US$300 billion in the Tresuary. Every single infrastructure have to be counted in - homes, road, pipes, etc, to get a valuation, which will takes months if not years to fully assess based on mark to market values. It would run into trillions, even for just a small little island like Singapore.
The only scary thing is when VALUE is worth nothing. No one trades, no one buys. This we must avoid AT ALL COSTS, otherwise what generations had build up would be lost. Fortunately, humans have needs and will have to spend, one way or another.
Can debts be an asset?
Yes, of course. Give a loan shark a credit card with $5000 limit and within 1 year, he will amass $200,000 based on a compounded interest of 20% per 2 week. ( True story from an army friend i knew).
But this illegal, fully usury and evil.
Debts can be asset because it lies in the interest. Even at simple interest of 5% for 30 years, it would be 150% of capital worth of earnings. The only time debts is not asset is when there is no growth, population stops, no one works, everyone starve to death. But why worry, we'll all be dead anyway.
As long as there is growth, debts will be a way for others to make money. And don't we all need money legally? Hope my posts cheers you all up and give some hope. Merry Christmas!
Originally posted by xtreyier:It's a lotta figures. It's mindboogling. It's scary. It's incomprehensible. But i will try to make it simpler to help more understand.
Imagine a world without money. Kuwait has a barrel of oil to sell to US. US digs up 3 nuggets of gold. Both agreed to the VALUE and transacts.
This is what trade at its basic level is all about - goods exchanged for an agreed upon value.
Earth has much resources and each time it is harvested or extracted, it has a value accepted by a majority of humans since civilisation begun. The standard in past centuries had been trust in gold.
In time, gold proved cumbersome and dangerous to carry around, so promissory notes - money, was used, in ancient civlisations such as China and India.
As civilisation progressed, money could be printed and broken down to smaller denominations, but each paper or coin is back by gold. The more gold extracted or robbed, as during colonnialism, the richer the country became.
Those countries without gold, accepted promissory notes issued by reputable banks for their goods and in turn, the more promissory notes they hold, the richer their country became when they either exchange it for gold or use it to trade for other stuff. Singapore, an non-resource rich country, is an example.
The value of the promissory note, which is now the US dollar which is commonly used in international trade, does not stay the same forever, simply because earth resources are continually being extracted and harvested.
For example, yesterday US extracted 1 nugget of gold = value $1, so $1 is printed. TOday, another nugget is extracted, total 2 nugget of gold in the treasury. By right the value of US$1 is now today US$2, but instead, it print one more US$1 dollar note for circulation.
No devaluation here or causing major confusion in the international market on the valuation of the dollar. ( This is simply explained, but in actual fact, there are many international mechanism and treaty to be honoured before even 1 note can be printed.)
....
Correct, that was how money originated.
And also, I'm sure this "international mechanism and treaty" is really effective. That's why the Bretton Woods system of a gold-backed exchange rate standard didn't collapse in 1971.
To be human is to err. We are flawed human beings, and only capable of learning from mistakes. Education attempts to limit such mistakes, not eliminate it, because it would be impossible to control any one individual's mind.
Thus for any system in place, there would be errors. Most critically and fortunately, humans can learn and correct from errors. The current international mechanisms and treaties, while may be flawed to some and is still being fine tuned, it still serves a critical function - enabling the exchange of good and services for survival.
Deriatives is a good idea, and i speak with bitterness in aknowledgement of the dammage it had done to lives.
Loans give a person a chance to own something such a roof over his head in the shortest time instead of saving money for it over long years. He only needs to pay more, and being human with brain, hands and legs, he can earn to pay off the loan.
Debts helps a bank to legally make money 'out of nothing', to pay off its depositors trust and make a profit. Central bank loans out money to govts, and collects loan interests, to build up its treasuries for social spending later.
For example, a million dollars loan out to govt for 30 years, would net $1.5million 30 years later. A baby citizen borned when the loan is given, would be entitled to this $1.5million when he reaches 30 yrs old. He can forgo this entitlement as a citizen, and leave it for the new baby citizen for his education and further social spending. Extrapoliate upon billions or even trillions loan, and a safety net is created for future citizens. Thus, debts are not social evils as some presume.
The root problem with deriatives right now is that people whom should not be allowed to obtain loan for even a dog's house is given credit! The loan officers and managers should be shot, hanged and left to dry for their failure to check, which lead to a loss of confidence in banks and investments, causing the dramatic and catastrophic crash of the financial markets, hurting even companies whom had been responsible with funds.
And like a low tide that reveals effluent on the shores, dubious ponzi schemes were revealed, adding further to the loss of confidence.
Right now, govts know the need to spend to avert disasters, and encourage spending. But the rich and banks arent listening. It is comprehensible why not. No point throwing good money after bad, and better to keep what's left to survive, and to hell with the masses. Hoarding up money is an individual's policy now.
It's a zero sum game, and may the rich and banks realize this. There are still more responsible companies out there than scammers or vilage idiot CEOs. If worldwide employment can have 90% of humans employed, the world can still be save. But if money continues to hoard up and unemployment figures run up, it will be the end. This may be our last Christmas on Earth.
Originally posted by xtreyier:....
Deriatives is a good idea, and i speak with bitterness in aknowledgement of the dammage it had done to lives.
Loans give a person a chance to own something such a roof over his head in the shortest time instead of saving money for it over long years. He only needs to pay more, and being human with brain, hands and legs, he can earn to pay off the loan.
Debts helps a bank to legally make money 'out of nothing', to pay off its depositors trust and make a profit. Central bank loans out money to govts, and collects loan interests, to build up its treasuries for social spending later.
....
I can't believe someone actually said that "derivatives is a good idea". For your information, derivatives are not loans. Derivatives do not represent anything of value. Loans are loans. Derivatives are so-called contracts, or in simplier terms, stock values placed on existing loans. Or, you could say it insurance on loans. In my opinion, its simply high-powered gambling for the financial elites.
While the US financial industry gets $8 trillion+ for the mess that it created with derivatives, the US auto-industry, which unlike the financial industry actually creates something tangible of value (cars), is only given a few billion to stay in business. It simply defies all logic when the US Govt is willing to spend $8 trillion to save non-tangible "derivatives".
If central banks lend money to governments at interest, then isn't the only outcome for the country debt to the central bank. In the context of the privately-owned Fed, it means economic slavery for the US and control by the financial elites. If central banks are by far the only way that countries can create money, and if they have a monopoly on it, which by the way is true considering that 97% of all money is created when central banks make loans to governments, then how do governments pay off the interest? Because the only way money can be created is through debt, only the principle amount exists. Where is the interest? It doesn't exist and thus, in the long run, debt and suffering is built into this fractional reserve system right?
i would die happy if 1% is with me
i wont be surprise if that is actual amount although i dont it much over exacturated.
maybe this is reason why US govt are trying so hard to bailout companies that could be involved in the derivatives betting. or companies that employ hundred thousands if not million workers to prevent more foreclosures of their house and thus causing more pain in the CDOs and derivatives market, which could otherwise bankrupt more banks or hedgement in the coming mths!
The world is run by a bunch of liars, 'make-up' artists and con men
what is real?
http://articles.moneycentral.msn.com/Investing/Extra/got-596-trillion-well-kind-of.aspx