Welcome to European Tribune. It's gone a bit quiet around here these days, but it's still going.

The point is that although there may well be $172 trillion of derivatives out there, they will in fact - if they are all performed - for the most part net down to zero (unlike derivatives in real things like oil where physical delivery takes place in "money's worth" rather than money).

The problem is that no one has the foggiest idea as to which of these derivatives are going to be performed, and which are not, let alone who is actually holding the shit, who can stand the losses and who cannot.

So we have a large collection of assets which individually look like they have value (and sit on the assets column of balance sheets) but in the aggregate have no value at all? That's even worse than with stock shares. Or maybe not, maybe a share is an "option on liquidity" and has nothing to do with a proportional share of discounted future dividends, or with a proportional share of a company's net equity.

It'd be nice if the battle were only against the right wingers, not half of the left on top of that — François in Paris
by Migeru (migeru at eurotrib dot com) on Tue Mar 25th, 2008 at 04:25:36 AM EST
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