[Micki]

$this->bbcode_second_pass_quote('Stratovarius', 'I') got a question myself... How do you place a value on a contract? Is it merely the underlying asset's value in the contract? Then how do we have a quadrillion bucks of this stuff?

wtf

[Fiddlerdave]

$this->bbcode_second_pass_quote('Quinny', 'S')o where's all the trillions of debts?

Who are the winners? So far we've been pointed at one relatively minor player a Mr Lahde.

Surely trillions can't disappear, we should be able to track it down.

Offer the losers a way out, ie cancel all bets and the winners would soon crawl out of the woodwork.

Come on their must be someone who can help find where it's going.

[nobodypanic]

the central theme here appears to be... unregulated.

well there you have it. the market operating completely free and unfettered w/respect to CDSs. result? the invisible hand has given us the derivative foot right up our very visible rears.

how anyone can still peddle that quasi-religious, pseudoscientific nonsense known as free-market capitalism w/a straight face in the light of this is beyond me.

[Stratovarius]

Christ! A derivative that's a derivative of a derivative.

$this->bbcode_second_pass_quote('nobodypanic', 't')he central theme here appears to be... unregulated.

well there you have it. the market operating completely free and unfettered w/respect to CDSs. result? the invisible hand has given us the derivative foot right up our very visible rears.

how anyone can still peddle that quasi-religious, pseudoscientific nonsense known as free-market capitalism w/a straight face in the light of this is beyond me.

[Quinny]

Thanks Micki very good article.

Fiddlerdave - But if some people have assets, then the others must have liabilities. I know my idea won't happen (yet) (willingly). I still think net gains and losses could be much lower than quoted. If there are some big gainers 'South of the border' as suggested before it's even more scary.

Someone just won the World!
If the system collapses, it'll happen by default anyway.
$this->bbcode_second_pass_quote('Micki', 'A') derivative doesn't necessarily need to have any asset backing it up. I would say a lot derivaties probably just have been backed up with other derivaties. That is how it could grow to 10X the real economy. (i.e. you don't need to have an asset, just a claim to one. And that builds up the chain of domino's as A has claim on B who has claim on C etc.)
When you come to tailored derivaties, some of them can even be totally open ended. i.e. the amount of profit or loss is infinite depending on outcome of a algorithm of numerous variables.
Greenspan himself also lobbied to keep derivatives unregulated and free from transparency.

Figures I've seen however suggest the global derivatives market is somewhere in size 1.12-1.4QUADRILLION dollars.
I do think this includes some double counting as contracts would be counted by both parties. On the other hand I also think there may be derivaties that haven't been reported on and as mentioned earlier, a number of open ended derivatives that can't be quantified. So reasonable amount might be anything >$600trillion.

Here is an article by Ellen Hodgon about derivatives and bailouts.
IT’S THE DERIVATIVES, STUPID! WHY FANNIE, FREDDIE AND AIG ALL HAD TO BE BAILED OUT

[vtsnowedin]

My question is ,Who holds the winning bets? 57 trillion or 1.2 quadrillion are both impossible numbers for the market to pay so governments will change the rules shortly but just who is standing in line to collect their winnings and what will happen when they get told to buzz off?

[ReverseEngineer]

$this->bbcode_second_pass_quote('vtsnowedin', 'M')y question is ,Who holds the winning bets? 57 trillion or 1.2 quadrillion are both impossible numbers for the market to pay so governments will change the rules shortly but just who is standing in line to collect their winnings and what will happen when they get told to buzz off?

[Quinny]

I can only LOL at the free marketeers who slavishly say you have to de-regulate. This mess has to be sorted in a way that minimises damage to real people. Cancel the lot and let them stew!
$this->bbcode_second_pass_quote('ReverseEngineer', 'H')owever, once you get to the point of the debtor being the Nation-State, you can't collect on the debt in any other way then by warfare. At a certai point it becomes OBVIOUS the nation state cannot pay off, an unless the citizens willignly turn themselves into slaves to pay off the creditors, you are gonna have a war. I hardly think Americans are going to willingly become slaves to the Chinese, so a watr here is inevitable. Not necessarily between the Chinese and Americans though, because the nature of this Chess Game is more complicated than that.
It has become obvious that about all the "rules" that existed in the market system are being violated every day. The system just is not WORKING anymore, and you cannot hold people to CDS obligations in the TRILLIONS they never will be able to pay off. The monetary system collapses. Its not Inflation OR deflation. Its COLLAPSE. That is why you folks trying to figure out which way this is going cannot figure it out. You are not looking at the right parameters, you are looking at monetary systems that had hiddne backups before this. Deep Pockets who could resurrect the system. Such a deep pocket no longer EXISTS.

[galacticsurfer]

What if some lawyer found a loophole in the law that says all these derivatives are null and void according to the opinion of some high court, then everybody would say "Never Mind".

[Quinny]

Or nationalise the 'normal' operational bits of the banks leaving the Chief Executives with responsibilities for sorting out the CDS. Ring fence the total toxic and let the crooks fight amongst themselves.

$this->bbcode_second_pass_quote('galacticsurfer', 'W')hat if some lawyer found a loophole in the law that says all these derivatives are null and void according to the opinion of some high court, then everybody would say "Never Mind".

[JPL]

Hi Quinny!

OK,I'll explain things as best I can. Derivatives appear & disappear from no-where. They are not 'real' money. The secret is that whilst the contracts are 'in the system', they act as if there are.

Lets do an analogy.Think of a rowing race (Oxford vs Cambridge, if you like).The paddles dip into the water briefly & then propel the boat forward according to the muscle power (leverage) of the rowers. Most of the action is above the water (the 'leveraged' money). That is the way it works.

Suddenly a rower gets his 'real money' paddle caught in the mud. Let us call him 'Mr Lehman'. The momentum of the boat plus the 'leverage' on his oar propels him straight out of the boat & into the water before he can say 'Oh f**k!'. Think of a big wide arc and a rapid splash & you'll get the picture.

Mr 'L' (unfortunately) hits some oars on boats coming the other way. Then we have a big 'up & downer' while everyone tries to get their boats upright again.

Then everyone has to figure out how to get the race back on schedule They were starting to figure it out but whilst this was going on, the team from Iceland rowed into a rock (loans) & foundered with lots of blubbering noises.

Meanwhile the Health & Safety crew (AKA the Gobermint ) are now sculling around in their rubber dingies & trying to both pull people out of the water & also string wet black & yellow tape everywhere because it be an 'incident' & they don't want to get caught short on not having been on top of the accident sooner. One of the things they are also starting to figure out is, these boats were only designed to hold water if they were moving VERY fast.

Does this help???

JP

[Quinny]

F*ck me JP

I just thought I'd got my head round it and you've confused me.

In my IBM days we went punting on the canal at Hook and I nearly drowned cause I got my punt stuck in the mud.

I know it's imaginary money, the point I'm trying to make is that it's at the margins where it matters. It's only the difference betwen winners and losers where it can hit the real economy.

This could be zero - I think it's probably a big number. The other bit that matters is the (taking the casino analogy) the house cut. This could also be substantial.

BTW how are you PM me with where you're up to.

$this->bbcode_second_pass_quote('JPL', 'H')i Quinny!

OK,I'll explain things as best I can. Derivatives appear & disappear from no-where. They are not 'real' money. The secret is that whilst the contracts are 'in the system', they act as if there are.

Lets do an analogy.Think of a rowing race (Oxford vs Cambridge, if you like).The paddles dip into the water briefly & then propel the boat forward according to the muscle power (leverage) of the rowers. Most of the action is above the water (the 'leveraged' money). That is the way it works.

Suddenly a rower gets his 'real money' paddle caught in the mud. Let us call him 'Mr Lehman'. The momentum of the boat plus the 'leverage' on his oar propels him straight out of the boat & into the water before he can say 'Oh f**k!'. Think of a big wide arc and a rapid splash & you'll get the picture.

Mr 'L' (unfortunately) hits some oars on boats coming the other way. Then we have a big 'up & downer' while everyone tries to get their boats upright again.

Then everyone has to figure out how to get the race back on schedule They were starting to figure it out but whilst this was going on, the team from Iceland rowed into a rock (loans) & foundered with lots of blubbering noises.

Meanwhile the Health & Safety crew (AKA the Gobermint ) are now sculling around in their rubber dingies & trying to both pull people out of the water & also string wet black & yellow tape everywhere because it be an 'incident' & they don't want to get caught short on not having been on top of the accident sooner. One of the things they are also starting to figure out is, these boats were only designed to hold water if they were moving VERY fast.

Does this help???

JP

[JPL]

$this->bbcode_second_pass_quote('Quinny', 'I') know it's imaginary money, the point I'm trying to make is that it's at the margins where it matters. It's only the difference betwen winners and losers where it can hit the real economy.

[Quinny]

What happened to the beautiful sailing ship ....

Sig's gone a bit darker methinks

[JPL]

$this->bbcode_second_pass_quote('Quinny', 'W')hat happened to the beautiful sailing ship ....

Sig's gone a bit darker methinks

[virgincrude]

JPL, that is an excellent analogy. I envy your kids, your bed time stories must be quite something!

As for tucking them off away on an island in the North Sea, I'm with the missus: extreme seclusion is not something most mothers would choose for their kids, and that sounds like some kind of 'survival' episode, only these little people would be deprived of interaction with their own kind at an important time of development. (Are you also doing homeschooling ....?)

[Quinny]

JP As you know I'm with your missus here. Those heading for Northern climes underestimate the effort to keep warm. Normandy, the odd cold snap, but Western Isles have always been cold when I've been there - in SUMMER!

[Ayame]

$this->bbcode_second_pass_quote('Quinny', ' ')I know it's imaginary money, the point I'm trying to make is that it's at the margins where it matters. It's only the difference betwen winners and losers where it can hit the real economy.

This could be zero - I think it's probably a big number. The other bit that matters is the (taking the casino analogy) the house cut. This could also be substantial.

[Quinny]

But I thought it was unregulated!
$this->bbcode_second_pass_quote('Ayame', '')$this->bbcode_second_pass_quote('Quinny', ' ')I know it's imaginary money, the point I'm trying to make is that it's at the margins where it matters. It's only the difference betwen winners and losers where it can hit the real economy.

This could be zero - I think it's probably a big number. The other bit that matters is the (taking the casino analogy) the house cut. This could also be substantial.