No wonder the global economy is a mess
I was pleased to see the rebound in the financial markets today but it is still troubling that no one can explain the sudden decline last week. Risk is the friend of investors but volatility is the enemy. Today's 400 point gain could become tomorrow's 1000 point plunge.
Greece and the EU are not out of the woods and some think the bailout is only a temporary fix. The fix doesn't correct the systematic problems embedded in sovereign debt. Nations, just as people, that spend beyond their means are eventually called to account.
This story is just frightening. Global stock market capital is ~ $70T and the world GDP is ~$61T yet the derivatives market is ~ $700T! WTF?!? How can speculation on $70T worth of equity be worth ten times the value of capital? And derivatives don't represent any productive capacity or capital, just speculation about whether capacity or capital is growing or declining. In other words, gambling on how things might turn out.
No wonder the global economy is a mess.
Greece and the EU are not out of the woods and some think the bailout is only a temporary fix. The fix doesn't correct the systematic problems embedded in sovereign debt. Nations, just as people, that spend beyond their means are eventually called to account.
This story is just frightening. Global stock market capital is ~ $70T and the world GDP is ~$61T yet the derivatives market is ~ $700T! WTF?!? How can speculation on $70T worth of equity be worth ten times the value of capital? And derivatives don't represent any productive capacity or capital, just speculation about whether capacity or capital is growing or declining. In other words, gambling on how things might turn out.
No wonder the global economy is a mess.
Labels: economy
posted by lugh lampfhota at 11:25 PM
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