DD5: How could there be for such a figure- $592 Trillion?
That's what banksters do when you give them a monopoly.
$592 trillion is the value of contracts outstanding, not the losses. The losses are huge, but significantly less than that. In the crude oil futures market, for example, the value of open contracts is a completely different number than the value of trades closed by a group of firms on that day. There are tangible assets behind derivatives they just aren't worth nearly what people paid for them, hence the massive losses. I barely understand derivatives myself - try to find your way through this mess:
Derivatives - http://en.wikipedia.org/wiki/Derivative_(finance)
CDS's - http://en.wikipedia.org/wiki/Credit_default_swap
I agree it is an understatement, but there are underlying assets. Also, I hear your question and would like to hear a better explanation of the figure myself. That being said I don't think "it must either all collapse or eventually be bailed out". FRB can work without the entire thing crashing down. There is an ongoing deleveraging that is massive, and may obliterate all the "stimulus" inflation anyway.
That's a big number for a whole bunch of nothing. :)
"The power of liberty going forward is in decentralization. Not in leaders, but in decentralized activism. In a market process." -- liberty student
DD5:$592 trillion is the US GDP X 42.
I've heard this number and some others similar to this DD5, this is also why I wondered how all money would not equal debt, but as you said FRB can fall back on the original gold backed dollars.
DD5:Yes, but this means that the 100-story building drop that the Austrians are recommending is more like a drop from outer space. Not that there would be any other alternative. It’s just that, given the magnitude of this $592 trillion figure, and the lack of attention that this is getting, especially here, I feel like I am perhaps misunderstanding the ramifications of this market.
That's why I thought it was insignificant. Here's an article I read on it some time ago. That's also why I said political will must be present to bring this back to the original gold-backed. This is why some people thought the government wasn't joking about AIG collapsing and bringing the world back to the cave man days. it would cripple pretty much everything. But I think people forget human will. Most of this collapse would bring the world economically to a stand still, but the market demands would still be present and people could quickly fill the gap. But it would be a huge purge of all the corruption that has occurred cause nobody has that much money to pay out. This is why the run on the investment firms would have turned Wall Street into a ghost town. The government stepped in, but this hole is so deep the government could never pay all of this off - never unless we want Zimbabwe. This is what is significant about AIG needing a bailout every month. The Japanese zombie banks and now the U.S. zombie banks. But the car industry, such as that article I gave shows, are knee deep in this crap too. So Fiat, Italian car company, is getting Chrysler but meanwhile Fiat gets bailouts from Italian government, U.S. government also according to the deal with them supposedly to get Chrysler, and Fiat is looking for a bailout from German government too. These companies will never receive enough money from bailouts to actually rid the insolvency. They are zombies, bankrupt, and only going on taxpayers money to stop the panic. If the panic doesn't stop and the value drops and these companies are left holding the bag in the trillions imagine the economic bombs going off. It can be done, but I don't think a lot of people would be able to handle the shock. A lot of people in the U.S. have become very comfortable in their fantasy land. So the bailouts will have to continue until the government just lets it go. If their were actually virtuous people handling this event, then it could be transferred in a calm way. People would be prepared. Education and thus information freely exchanged to help people realize what really is happening and measures could be taken to cushion the blow to people's minds. But the politicians are panicking and don't know or lie about what to do. It's one of the arguments as to how the Nation-States will actually crumble and beg to join a more fuller and explicit World Government. But all this crap is nothing really. I mean companies would collapse, but none of this factors in the actual actions that do anything in the market and thus society as a whole - the human being. And we won't collapse unless people lose their minds. But if people hold it together, then the market can collapse but the market is not a weapon that can physically hurt you. It's when humans panic and become paralyze and do nutty crazy things that throw projectiles and things that can harm others. But some people are so locked into the fantasy world of the State they wouldn't know what to do. But it's really all a state of mind and an issue of will power on getting through anything.
Well, that's my take on not letting my spirit or anybody's spirit fall apart.
Amazing post, wilderness! Unfortunately the world is in tremendous want of that kind of leadership...
What you said reminds me of an idea I once had related to Keynesianism. If the role of the govt is to coax the animal spirits back into the marketplace, why can't they be honest and use more true rhetoric and leadership than blowing through massive amounts of taxpayer $$? It's such a shame that Obama wastes his "talent" for rhetoric and being "cool and collected" on destroying the economy. This recent crisis was a great opportunity to do good things.