Thursday, October 2, 2008

This is Depressing.

One of my favorite blogs is Global Guerrilas , I don’t always agree with everything John Robb says but he is always interesting and has many valuable and unique insights into current events. In his recent post Systems Shocks he gives us this very disrobing information;

Too Big. Simply, the system's scale is far beyond the ability of nation-states, or a community of nation-states, to manage when it suffers a breakdown. In the case of the current financial collapse, the global shadow banking system (a globally inter-networked collection of unregulated financial products) is approximately $450 trillion, as compared to a US GDP of $15 trillion or a global GDP of ~$60 trillion. Put another way, the financial liabilities of the highly leveraged Deutsche Bank are 80% of Germany's GDP and Barclay's liabilities are 100% of the UK's GDP. As the leverage underlying the shadow banking system unwinds and more banks fail, the scale of the loses experienced will rapidly exceed nation-state budgets.

Think about that for a moment, $450 Trillion in unregulated, don’t know what their worth securities out there. That means the $700 Billion bail out plan is a whopping 0.15% of what would be needed if these things all turn out to be toxic waste. The problem is no one knows what, if anything, these things are worth. The world economy is a liner running at top speed through an ice berg flow

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