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A dangerous bubble of derivatives trading


According to its quarterly report, the total amount outstanding in the derivatives market was $677 trillion at the end of 2007. This is a notional figure based on the face value of traded derivatives, giving an idea of the cash flow involved. And the total turnover (sum of buying and selling) of the derivatives trade in organized exchanges was $2,289 trillion in that year.

These are unimaginable numbers, normally found in cosmology or particle physics. In the real world, for the sake of reference, consider the gross world product for 2007, which is the sum of the value of all products and services created in that year – it is a mere $65 trillion, about one-tenth of the derivative market. (A dangerous bubble of derivatives trading-India Business-Business-The Times of India).

Paulson Thinks US$700 bn?

Not enough, Henry! This will take much more. Much, much more. How much more, I dont know! Nouriel Roubini says, 2.5 trillion. Kenichii Ohmae says US$5 billion.

The CDOs, CDS, swaps, options, swaptions – the whole market now resembles a betting ring. It is no longer about finance specialists.

Announcement

The 2ndlook model for a Third currency Bloc is ready. Join in to review, participate, critique and develop the First Cut. While the need for a new global reserve currency has been evident, there is very little in the public sphere. The speed of events has clearly caught the BRICS and Third World napping – and unprepared. But, not 2ndlook – who, from the very beginning, proposed that the world should stop clinging to the Dollar-Euro skirts.

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