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Derivative market bigger than the US economy ! - when will we wake up?


File:Exter.png
Original Exter's pyramid 

 Exter's Pyramid (also known as Exter's Golden Pyramid and Exter's Inverted Pyramid) is used for visualizing the organization of asset classes in terms of risk and size. In Exter's scheme, gold forms the small base of most reliable value, and asset classes on progressively higher levels are more risky. The larger size of asset classes at higher levels is representative of the higher total worldwide notional value of those assets. While Exter's original pyramid placed Third World debt at the top, todayderivatives hold this dubious honor.

John Exter (September 17, 1910 – February 28, 2006) was an American economist, member of the Board of Governors of the United States Federal Reserve System, and founder of the Central Bank of Sri Lanka. He is also known for creating Exter's Pyramid.

Ref http://en.wikipedia.org/wiki/John_Exter

A pyramid covering many more risky assets:
One picture in this case is absolutely worth well over a thousand words.

The derivative market is more than the size of the US economy !!



Trading in derivatives reached tremendous levels before the recent financial crisis, and that burst of activity received a great deal of criticism later, reflecting perceptions that risk-taking by financial institutions was excessive and that derivatives helped to elevate considerably the severity of the crisis.

Ref:
Federal Reserve Bank of Cleveland http://www.clevelandfed.org/research/trends/2011/0811/02finmar.cfm

The amount of money the federal government owes to its creditors, combined with IOUs to government retirement and other programs, now tops $15.23 trillion. That's roughly equal to the value of all goods and services the U.. economy produces in one year: $15.17 trillion as of September, the latest estimate. Private projections show the economy likely grew to about $15.3 trillion by December — a level the debt is likely to surpass this month.

Ref: http://usatoday30.usatoday.com/news/washington/story/2012-01-08/debt-equals-economy/52460208/1



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