The Underlying Financial Problem

While there’s plenty of blame to go around as to why are in so much trouble financially, the underlying time bomb that overshadows the others by a mile is the unregulated market for credit default swaps or CDS’s. Today on NPR, Peruvian economist Hernando de Soto came up with a number nearly twice the size of the one I was using. These unregulated private deals are thought by him to total about $1.2 quadrillion. US$1,200,000,000,000,000.00. There isn’t that much money in the world. The world economy is, well, smaller than that. Like 4% of it; let’s use the World Banks figure of $48 trillion. The liabilities out there are worth a quarter century of total global output. Needless to say, a trillion here and a trillion there will not correct this massive house of cards.

The graphic above shows what a quadrillion pennies would look like. Multiple by 120, and that's the debt we're talking.

Dog help us.