M.A.D.: The $600 Trillion Time Bomb – Money Morning
Monday, 20 February, 2012 Leave a comment
My learned colleagues, at Ontonix, recently undertook the task of analysing over 600 macro-economic parameters from the World Bank for the period from 1970 to 2010 and posed the question: “how much globalisation can the World afford”?
This may seem to be a curious course for a firm whose Founder and CTO is quick to quote Zadeh’s Principle of Incompatibility but should be viewed in the context of a genuine desire to “educate and inform”…and, of course, to showcase Ontonix capabilities!
Read on because “high precision” may not be required. A rough idea of the numbers and the implications should suffice!
However, my point is that, IF the conclusions are based upon known data, is it safe to assume that THIS (mere $600Tn) is “unknown” i.e. not included in World Bank data, despite the relevance upon the pace, nature and extent of collapse?
If so, surely the process of collapse is already more advanced than any one person/body/nation could have anticipated!? In which case we can’t afford the current debt level, but keep on racking it up without the slightest idea of where, when or how it will all burst: Mutually Assured Destruction…
The notional value of the world’s derivatives actually is estimated at more than $600 trillion. Notional value, of course, is the total value of a leveraged position’s assets. This distinction is necessary because when you’re talking about leveraged assets like options and derivatives, a little bit of money can control a disproportionately large position that may be as much as 5, 10, 30, or, in extreme cases, 100 times greater than investments that could be funded only in cash instruments.
The world’s gross domestic product (GDP) is only about $65 trillion, or roughly 10.83% of the worldwide value of the global derivatives market, according to The Economist. So there is literally not enough money on the planet to backstop the banks trading these things if they run into trouble.