Derivatives Bubble Time Bomb
We are part of the world’s biggest casino. It’s called the derivatives market. The Bank for International Settlements reported that the total net worth of all outstanding derivatives contracts is a whopping $493 trillion. It’s hard enough to comprehend that our U.S. debt is approaching $20 trillion. Most Americans find that number unfathomable. It’s virtually impossible to quantify that number in our heads. The global economy is estimated at about $78 trillion annually, while the derivatives market is growing at around 6 times this value. This bubble is potentially the biggest economic catastrophe time bomb in world history.
If you’re not sure what a derivative is, think about how a casino operates: it’s a bet against everything. Everything of economic value has a derivative attached to it from stocks, mortgages, interest rates, and prices of commodities like oil, gold, and wheat. You can even bet on a nation’s currency to default. It’s a speculative contract; they have a bet placed.
The derivatives market is the real weapon of mass destruction. It gambles away trillions of dollars every day on the bet of the future price of the asset to which the derivative is attached.
This message was adapted from the World Economic Report.
You are invited to contact “The Money Doctor,” Mr. William F. Richardson, author, speaker, financial strategist, and retirement specialist for Citizens Financial Security and its affiliates. He is also the founder and director of The California Educational Institute of Wealth Enhancement. To learn more, please email William (at) MoneyDoctorAdvisor.com. This report is for educational informational purposes only. It is not designed or intended to offer tax, legal, investment advice, or an offer to sell. When making financial decisions, always seek the advice of a qualified professional. © 2006-2016 The Money Doctor. All rights reserved.