Towards one quadrillion US dollars in derivatives

By Ben Tanosborn

A quadrillion figure seems far-fetched, one to be used only when referring to distances in the confines of intergalactic travel, and not the world of international finance.  After all, Mars is just a measly 34 million miles away (at perihelion – when at its closest point to the sun); and the edge of our solar system barely reaches 9 or 10 billion miles.  So, when talking about a quadrillion dollars, we need to reset our financial minds from the microscopic minimum wage to the mach-speed technology of the Enterprise; and leave behind the Good Ship Lollypop, where most of us uninitiated, financially-duped, yokels travel these days.

Well, we are not there yet – reaching that quadrillion – but a 43 percent jump in the U$700 trillion in derivatives “said to be” outstanding today will put us over the top. Not that the quadrillion figure represents a critical point; that critical point was reached well over a decade ago when the derivatives’ total exceeded the sum total in resources that planet earth had.  And here we are, idiotically staring at a figure already 10 times that.

Under the pretense that free enterprise is sacrosanct, and exempt from any and all government regulation, we have allowed Wall Street and its brothers-in-crime around the world to create a gambling-currency operating side by side with the dollar, a pseudo-currency which follows its own gambling whims without the scrutiny by any government via regulatory reserve boards of some sort.

So we are told that derivatives are contracts ballooned to the point of burst; but, if they look like money and smell/fold/spend like money, shouldn’t it be considered money?  After all, they derive from one or more underlying assets which by definition carry value/worth.  And those underlying assets can range from bonds, to commodities, to currencies, to stocks, to indexes of all types (interest rates, financial markets, and many other causal or intervening variables that have not even been heard by either the gamblers in Las Vegas or the underwriters at Lloyd’s of London.  Speculation ad nauseam and not the broadcast hedging that we are told about by a criminally deceitful Wall Street crowd.

Other than for blatant speculation, there is absolutely no reason to have 700 trillion US dollars “out there” in derivatives; not even 500, or 100, or even 10.  And if we think for a minute that it is a problem between gamblers, risk takers, and risk minimizers, we are all ignorantly wrong.  And the ultimate payers for a fractured financial world will not be restricted to the high-stakes international players, but society as a whole… and the natural and human resources that combine in the creation of wealth.

This daunting, if unheralded for now, oppressive problem could have been prevented at its very roots via minuscule taxation which would have clearly separated hedging from obscene speculation.  A simple “one-mil” tax on every contract dollar, certifiably collected at the time contracts were written, would have likely prevented the derivative amount to exceed the 3-5 trillion dollar mark, keeping us all safe from an impending world financial crisis… and allowing governments more petty cash to conduct their wars.  But here in the US, in similar fashion as that which negated curbing real estate’s ugly speculation, government (or rather, our collective political gang) prefers a hands-off policy when it comes to capitalism’s greatest virtue: greed.

It’s beginning to look as if the US financial salvation will soon cease to depend on the Fed and the government’s self-mutilating behavior; and, as un-American as it may seem, be shaped by foreign hands.  It won’t be long until the American dollar ceases to be the reserve currency for much of the world, Western World’s financial-milking days looming to be permanently over.  Whether BRICS, China alone, or a consortium of currencies backed by financially responsible nations, end up revamping the insane financial system in existence today, you can bet that the math wizards birthing trillions in derivatives won’t be allowed to operate in their purposely complex, deceitful ways.

Note: In this article we make reference to the standard dictionary numbers in the so-called short scale (used by the US, Canada and Britain) and not the long scale (used in Continental Europe and much of the world).  Past one million, where there are six zeros in either scale, the billions, trillions, quadrillions (… and so forth) would require adding six zeros in the long scale for every three zeros added in the short scale.

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Ben Tanosborn

Ben Tanosborn is an independent columnist. After completing graduate studies at UCLA (University of California, Los Angeles), BT set out for a career in international business that would take him to five continents, expose him to several cultures, and make him realize the importance for any and all Americans to become goodwill ambassadors for the United States. With his socio-political columns, BT hopes to bring to the forefront issues that are relevant to the national discussion in international affairs. BT resides in Vancouver, Washington (USA) where he operates a business consulting firm.

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