Remember when political and economic leaders triumphed the idea that they had solved what could have been the worst economic collapse since the Great Depression?
And, remember how politicians and technocrats championed the idea that they had solved part of the “problem” by punishing banks with new regulations, including passage and/or implementation of Dodd-Frank and Basel III?
Well, here is a look at what the world’s biggest financial numbers look like today with a discussion of how they looked in the past.
(If there were ever any question as to the rise of finance as “the” dominating force in the world today, as opposed to something with meaning, such as Christian access to Jerusalem in the 11th and 12th centuries, these numbers ought to convince you.)
The following presents a bubble plot of probably the largest financial figures the world has ever seen. A table of the figures is given a little later.
Biggest Financial Numbers chart
The smallest of the bubbles is the amount of US currency in circulation, at about $1,280,000,000,000, followed by euro currency in circulation at around $1,500,000,000,000. Worldwide, there is around $5,000,000,000,000 currency in circulation. Amazingly, in 1990 there was a mere $1,000,000,000,000. In 2002, $2,000,000,000,000. Just twelve years later, $5,000,000,000,000. Money demand that “isn’t induced” certainly hasn’t grown that quickly.
Next on the list is EU and U.S. national debt at $15,700,000,000,000 and $17,600,000,000,000. The size of EU and U.S. debt situation has ballooned in recent years, with US government debt up an amazing $10,000,000,000,000 over just the past ten years.
More than twice as big as EU and U.S. national debt is the size of the offshore accounts of individuals smart enough to stash cash offshore – a whopping $32,000,000,000,000 in 2013. The amount has surely ballooned to maybe $35,000,000,000,000 now and surpass $40,000,000,000,000 by the end of 2015.
Biggest Financial Numbers: Derivatives?
Ahead of cash stored offshore by smart (some might say “wealthy”) individuals is an investment bank. The estimated value of Goldman Sachs’ derivatives contracts is about $49,000,000,000,000.
At about $11,000,000,000,000 more than the notional value of Goldman Sachs’ derivatives contracts is the sum of all corporate, government, and consumer debt in the U.S., at about $60,000,000,000,000.
On top of all U.S. debt is the notional value of all JPMorgan Chase & Co. (NYSE:JPM)’s derivatives contracts, estimated at about $70,000,000,000,000.
Slightly ahead of JPMorgan Chase’s massive derivatives business is worldwide GDP, estimated to end 2014 at $75,000,000,000,000. It would not be surprising if JPMorgan Chase’s derivatives business surpasses total measured global GDP in 2015, if not sooner.
At about $100,000,000,000 is total government debt across the globe, up an astounding $30,000,000,000,000 since the 2008 financial crisis.
Dwarfing government debt is the sum total of all consumer, business, and government debt at $225,000,0000,0000,0000. The massive accumulation of debt began in the 80s, and seems to have experienced little hiccup from the 2008 financial crisis, still growing at an exponential rate.
Just ahead of all worldwide debt is the top 25 US banks’ exposure to derivatives at about $238,000,000,000,000.
The granddaddy of them all is the notional value of all derivatives contracts in the world, ranging from a low of $700,000,000,000,000 to as high as $1,500,000,000,000,000. That’s $1.5 quadrillion.
So, what exactly is it political and economic leaders are talking about when they say they’re policy moves “fixed” the world from a financial crisis?
The simple answer is – who knows? Some elected officials probably think making it harder on banks to trade in commodities or limiting trading by banks with their own money somehow is making the financial system better.
Judged by the financial numbers, what it looks like happened is policymakers simply kicked the can down the road.
Eventually, the rooster will come home to roost. When that day comes – i.e. the day when individuals lose trust in the financial pyramid aptly described as a house of cards – it will not be pretty. Maybe some economist will be right that the day will never come. There’s a good deal of risk associated with that bet.