$700 trillion phony instruments

Quote from power:

But if today, USA sells $23 Trillion real estates, USA economy will get $23 trillion cash or money.

Asset value = Cash.

So Asset value will flow into the economy the moment the asset is sold or realised.

Smaller example, if you have Gold worth $10,000 (asset), you will earn cash $10,000 when you sell it.
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It doesn't work like this... If I have $10k worth of gold and I sell it, does anything actually change in a meaningful way?

As pointed out by others, GDP is a measure of value added, not of total value.

Unless you are talking about the total value of all the assets in the world, which is largely irrelevant, since it's kinda immeasurable.
 
Quote from power:

But if today, USA sells $23 Trillion real estates, USA economy will get $23 trillion cash or money.

Asset value = Cash.

So Asset value will flow into the economy the moment the asset is sold or realised.

Smaller example, if you have Gold worth $10,000 (asset), you will earn cash $10,000 when you sell it.
More...

But the point is, you are not. You haven't. GDP is the money you've earned this year. Assets are accumulated over many years.

Moreover, who are you selling all the real estate to?

And in your gold example, if your gold is worth $10,000 and let's say you made $60k in salary, does that mean your income is $70k?
 
Exactly! Otherwise my wife and I could just sell each other a bar of gold back and forth 5,000,000,000 times in one year and now we've just increased the the US GDP by 5 trillion dollars, right? Not to mention set the world record for highest sales in a year of any company by a landslide.

Yeah it doesnt work like that.
 
The $700 trillion is notional amount, and the PnL get change hands b/w two counterparties. It's a zero sum gain game both side is willing to play. The hedgers who sell risk probably benefited while the speculators that bought risk are all in the craphole (no talent HF managers/badly managed banks who overtook massive risk through derivatives). It does effect the real economy when it takes down crap like AIG for shorting CDS on CDOs.....wasn't a smart move to begin with.
 
I WOULD LIKE TO ASK YOU ALL

700 trillion of phony instruments are inflationary (asset inflation to be more correct) and no matter what accounting you use for economic activity these 700 trl are extremely dangerous.
 
Quote from jueco2005:

700 trillion of phony instruments are inflationary
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that's not really true. an option (for example) has real value. It's not worth nothing. It may not be worth as much as it is sold, but it's certainly worth something.
 
Quote from plugger:

world GDP is $60 trillion. Think, US is 14 trillion, China is 4 trillion, etc.
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USA GDP is $14 trillion. How could USA government give $10 Trillion bail-out to bankrupt companies?.

The answer "money printing machine".
 
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