The casino economy
De Borchgrave delivers the sermon.
Even the world’s most savvy stock-market giants (e.g., Warren E. Buffett) have warned over the past decade that derivatives are the fiscal equivalent of a weapon of mass destruction (WMD) – potentially lethal. And the consequences of such an explosion would make the recent global financial and economic crisis seem like penny ante. But generously lubricated lobbyists for the unrestricted, unsupervised derivatives markets tell congressional committees and government regulators to butt out.
While banks all over the world were imploding and some $50 trillion vanished in global stock markets, the derivatives market grew by an estimated 65 percent, according the Bank for International Settlements. BIS convenes the world’s 57 most powerful central bankers in Basel, Switzerland, for periodic secret meetings. Occasionally, they issue a cry of alarm. This time, derivatives had soared from $414.8 trillion at the end of 2006 to $683.7 trillion in mid-2008 – 18 months’ time.
The derivatives market is now estimated at $700 trillion (notional, or face, value, not market value). The world’s gross domestic product in 2009: $69.8 trillion; America’s, $14.2 trillion. The total market cap of all major global stock markets? A mere $30 trillion. And the total amount of dollar bills in circulation, most of them abroad: $830 billion (not trillion).
With risk over ten times world GDP, it’s just a matter of time.
When the derivative market explodes, the bankers will try to to take everything. Someone will have to stop them.
