Tuesday, July 15, 2008

Math Lesson: 569,000,000,000,000

Via The Journal of Improbable Research:

Derivatives Market Grows to $596 Trillion on Hedging

The market for derivatives expanded at the fastest pace in at least a decade last year as the global credit crisis spurred trading in contracts used to hedge against losses, according to the Bank for International Settlements. Derivatives, including those based on debt, currencies, commodities, stocks and interest rates, expanded 44 percent from the previous year to $596 trillion, the Basel, Switzerland-based bank said in a report today.

So says a May 22, 2008 Bloomberg report.

596 trillion is a big number. It’s about $100,000 of derivatives for each person on the planet.
(Or, if you limit it to the United States, almost $2 million per person).


(Thanks to investigator Mark Dionne for bringing this to our attention. He adds:
“(1) Click here to hear the best piece I have heard on the whole situation (and I have read/listened to a lot of them).”
“(2) “If the people creating these derivatives take just 0.1% in fees, they are getting $596 billion.”
“(3) “The global yearly domestic product is about $50 trillion.” )

ADDENDUM: The 1995 Ig Nobel Economics Prize was awarded jointly to Nick Leason and Robert Citron for their success at betting on financial derivatives.