Next Bubble: $600 trillion? They Would Rather You Concentrate On The Gulf Disaster, Then This One Coming. Global Green Earl

"everything from commodities options to credit swaps –
topped $604 trillion worldwide at the end of June 2009".  

" To comprehend the relative magnitude of derivative
contracts globally, the CIA Factbook estimates the 2009
Gross Domestic Product of the world was just under $60 trillion. 

Does anyone else here see a problem with the figures above?
_Citizen Activist

---

---

WIND MONEY

Next bubble: $600 trillion?

Cities, states, universities could sink from monster derivatives meltdown

---

Posted: April 19, 2010
9:40 pm Eastern
By Jerome R. Corsi
© 2010 WorldNetDaily
 

Bank of International Settlements in Basel, Switzerland

As interest rates begin to rise worldwide, losses in derivatives may end up bankrupting a wide range of institutions, including municipalities, state governments, major insurance companies, top investment houses, commercial banks and universities. Defaults now beginning to occur in a number of European cities prefigure what may end up being the largest financial bubble ever to burst – a bubble that today amounts to more than $600 trillion. The Bank of International Settlements in Basel, Switzerland, now estimates derivatives – the complex bets financial institutions and sophisticated institutional investors make with one another on everything from commodities options to credit swaps – topped $604 trillion worldwide at the end of June 2009. To comprehend the relative magnitude of derivative contracts globally, the CIA Factbook estimates the 2009 Gross Domestic Product of the world was just under $60 trillion. Derivative contracts, therefore, have now reached a level 10 times world GDP, meaning even a 10 percent default in derivatives would equal world GDP. The small 800-year-old town of Saint-Etienne in France has just defaulted on a $1.6 million contract owed to Deutsche Bank. The city entered into a complex currency-swap arrangement to reduce the cost of borrowing some $30 million. To cancel all 10 derivative contracts Saint-Etienne currently holds would cost the town approximately $135 million, more than six times the amount initially borrowed, largely because no bank or institutional investor would want to purchase contracts that are now on the losing side of the bet. Saint-Etienne is only one of thousands of EU municipalities that bought into derivative contracts as a way to cut the costs of municipal borrowing. (Story continues below)

A key problem with derivatives is that in the attempt to reduce costs or prevent losses, institutional investors typically accepted complex risks that carried little-understood liabilities widely disproportionate to any potential savings the derivatives contract may have initially obtained.

The hedge-fund and derivatives markets are so highly complex and technical that even many top economists and investment-banking professionals don't fully understand them.

Moreover, both the hedge-fund and the derivatives markets are almost totally unregulated, either by the U.S. government or by any other government worldwide.

But losses on derivatives are not limited to government entities.