Ponzi and the Happy Days (Are Here Again) Gang
My friend Dave McLean, currently living in Presov, Slovakia, alerted me to this piece by Dan Roberts in the Guardian, which, with the aid of some cheery graphics, explains, in layman's terms (or as layman as he can get), the extent of the less-than-cheery global financial crisis, and why the infusion of hundreds of billions of dollars from the federal government isn't likely to stabilize the beast. Just how much is the world in debt? Or overvalued? Some stats: from small to large numbers:
- $845 billion: The amount of gold reserves in central banks — held as a buffer against financial instability.
- $3.9 trillion: All global notes and coins in circulation, plus reserves, in Oct. 2008.
- $39 trillion: The assets (or loans due to be paid back) at the world's big financial banks.
- $62 trillion: The peak amount of credit derivatives, which, from my limited understanding, is a financial instrument whose value is derived from the value of something else, such as an asset or index. All part of the shadow banking system, which I also don't understand.
- $290 trillion: Peak of the total asset value of all developed economies.
Roberts says that it resembles, if anything, a Ponzi scheme. I get it...but still don't understand it.
Meanwhile Wall Street bankers gave themselves $20 billion in bonuses for 2008. That, unfortunately, I understand.
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