Yep, I have been saying for years that, even if there is an issue with derivatives, total gross notional is an pretty meaningless measure of the issue. Mkt value is a better measure. If you want to use precedent and look at the Lehman default, a conservative estimate of the portfolio losses there is arnd $315mln. That, on a $9trn notional portfolio, is arnd 0.0035%.Quote from sle:
Further, the exposure of 70tn is absolute notional outstanding, whch is probably netted across counterparties in a rather benighn way.
Unfortunately, people take notional exposure as some number that actually has significance while in reality it's risk that matters. For example, 2s/10s and 10s/30s CMS spread options in the brokers market have social size of 1bn, so getting to trillion with fairly little risk is not that hard.
I am in agreement with you, conceptually. I am just trying to be pragmatic about government, governance, regulations and stuff like that. I just don't think the answer to our ills is anything as extreme as most people like to suggest. Given our current state of development, the solutions are, unfortunately, likely to be complicated and involve balancing carefully on knife's edge.Quote from StarDust9182:
Your argument is sound that laws created by states are not enforceable if people's behavior is against those laws. Natural laws (math, science) like gravity don't care much whether you enforce them or not. We should discover and apply those laws and whether they are written down or not is not material to me. You win but all of us (including you) lose.
Why then have governments at all? We changed 10000 years ago and gave some individuals the power to guard and regulate our food supplies so that we would be able to get out of the survival of the fittest threat. Later that turned into the derivative we call money. Now those guardians have turned on individuals and have become the threat to individuals under the guise of making things better or safer. Power corrupts ...
âNo man's life, liberty, or property are safe while the legislature is in session.â ― Mark Twain
If we have no society then we have chaos and might is right. If we have an organized government out of our control, then we have might is right and not 1984 but Brave New World apparently:
http://floatingworldweb.com/@EBOOKS/@PDF/ESSAYS/Amusing Ourselves to Death.pdf
Individuals still have the power of numbers although integrity may require a price to be paid. The internet has the ability to replace brokers of all types. Government is basically a broker as well. That is why I suggest a public banking system run over the internet and lots of smaller entities using it.
I guess in the long run, it doesn't matter much. No matter how hard organized leaders fight natural laws, only one side can win. Perhaps you are correct - there is no good organized society and thus no reason to try to build one. When the mathematics of exponential growth and debt forever finally chimes in with it's final blow, then we can say we were right after all - like the final scene in "fight club".
Even though I lose arguments (LOL), one purpose for me is not to stop, but to try and change an outcome that I sense is mathematically certain. We all need to learn to put down our fears and take up again what put us here in the first place. Our behavior has to change before the natural laws kick in. We need a better peaceful society for individuals.