$51,055,587,000,000 Outstanding Debt Means No Recovery

I Hope I Have This Wrong……

In my efforts to self educate on subjects Economic I have spent a lot of time reading Newsletters of various perspectives. Majorities are from Analysts offering their services in making money in ‘Bear’ Markets. Peter Schiffs “Crash Proof & Bob Pretchers ‘Conquer the Crash’. Both Authors have one clear prediction for the future and it matches any horror story I have read in terms of provoking thought born of fear.

I understand from simple observation that no one bar the most deranged individuals believes a recovery is actually happening. The story is easier to believe living in Australia where the “Greatest Financial Crisis in History” hardly affected us. Yet I know that around the time of Lehman Brothers collapse and the days following it was quite possible I might have woken up to find the ATM offline and the entire Global Banking system in ruins.

I have read the story of Lehman’s (‘A colossal failure of common sense’) I know at the time they were leveraged at something like 44:1 in Derivatives they were entangled with and a Stock price that went from $80 to nothing. I can understand that a lot of Shareholders lost a lot of money. As with Bear Stearns. I quote Ellen Brown of Global Reserch “Before it collapsed, Bear Stearns was the counterparty to $13 trillion in derivative trades”.

My question is what about the Derivatives ? Lehmans and Bear were not the only ones pumping these instruments through the system for the years leading up to the Crash.

I have recently read that over 74 Trillion in Derivatives are still out in circulation; the Author quoted his information from the Bank Of International Settlements. 74 Trillion is several times the Worlds GDP. Its also the lowest estimate I have heard; others claim as much as 140 Trillion is closer to the number.

I went to the BIS Web Site and most of the PDF Tables were unintelligible to me. I did find one that showed Developed Countries at $20,679,877 & Europe with $13,100,908 in Millions of USD these two alone = $33,780,785 Millions of Dollars if I add the appropriate 6 Zeros we get $33,780,785,000,000 throw in the “Other Exposures” $51,055,587,000,000 The number is staggering. The few Trillion of of injections by World Governments hardly even scratch a number that big.

I have to conclude that at present these debts are being circulated around or being kept out of the real Economy by a sort of Financial Musical Chairs the missing chair being provided for by similar forces that created the 14 Digit Number.

A person does not need much Economic knowledge to figure that it would take only a small hiccup and we will wake up to the disaster that was so brilliantly averted by our leaders. What seems to be happening now is the markets are moving sideways, virtually everyone is aware of the Elephant in the room but would rather stay in that most Human of all states when faced with a chronic problem, Denial…..

I will attempt to include one of the tables here, I had to use a Screen shot as they are in PDF and not separate images. The question I would like help with here is for some of you more educated in the subject to have a look your self’s and please tell me I have got this all wrong.

David

#“All of that seems right to us so far. The deflationary argument depends on the collapse of both the shadow AND the real (deposit taking) banking system. The shadow banking system is the murky world of credit, securitisation, and derivatives which currently supports and/or holds some $600 trillion in assets. Yes that's trillion with a T.”

#The Daily Reckoning Australia (Dan Denning)