Not a guestimated figure or tin foil hat derived but an official stat from the inspector general of the bail out programme.

This is in case of worst case scenario, but it shows the power of escalation. If the worst case scenario causes this liability, then you can expect the worst case scenario to keep getting worse.

http://www.politico.com/news/stories/0709/25164.html

lol @ "not a tin foil hat derived" number

remember when 1 trillion used to be a big number?

If by that you mean the number given by the government bureaucrat whos job it is to over see the bailout then yes I agree.

Its obvious the number was said for effect but it still does a good job of expressing the liability.

As far as I am aware the person giving this number is a neutral civil servant, so gave this number not for political point scoring but to illustrate the dangers of the potential cost of the bail out.

Also hi felstien.

Economic ignorance is not something to take pride in. But its easier to pretend and believe in fairly tales. And that's the game of those in charge - MOPE - management of perspective economics. Pretend and extend. You can keep sucking down the noensense they shovel, or you can think for yourself.

Blue pill or red pill?

===============================

LOL!!!!!!!!!!!

This is just the amount the US could be theoretically liable for based on the current guarantees it has already extended.

Why do you think Barney Frank's financial reform package, HR 4173, explicitly authorizes the FED to pump anther 4 trillion? Do you think its because only "lol tin foils" expect there to be a potential need for any more bailouts?

Are you people crazy - the big 4 TBTF banks, otherwise known as proxies for the Federal Reserve, hold 95% of the $203 trillion in US bank derivatives ($191 trillion).

80 for JPMC
40 for GS
39 BOA
32 CITI

120, over half, with JPM and GS.



Look at the column total swaps - these are largely interest rate swaps. Guess what happens if the FED and its proxy banks loose control (yields doesn't need to move too far) of the bond market?

Worldwide we have like 600+ trillion in derivatives.

23.7T is nowhere near the tin foil number in the big picture. But then again, these numbers get so big its basically incomprehensible.

You're essentially only quibbling with the "derived" part. Fine, you can actually get these numbers if you add and add and add. Great. It's still a meaningless number to be concerned about. Something that the Goldline and Beck crowd can stamp on their bumpers to generate hysteria (read: sales) for the incoming Obamapocalypse. Is the country collectively going to be thrown in debtor's prison? Are we going to tax people 200% of their income? What's the point in talking about this number, exactly? Money would be worthless and we'd be eating each others' legs if this ever came to be... but I guess that's what half of you guys want, so maybe that's the point.

BTW OP, this "story" is half a year old. And it's spelled "program."

Also, Barney Frank is gay and fat, and this cannot be mentioned enough.

While we're at it, here are some other VERY IMPORTANT, LET'S DISCUSS THEM, THEY COULD REALLY HAPPEN scoops that flew under the Politico's radar:

Wow something must have hit a nerve to set off a strawman this epic.

If central banks lose control of interest rates the derivatives blow up and take the banks with them. If the fixed to float spread rises to just 5%, the exposure on the $200T in interest rate swaps jumps to $10T. This is more money than currently exists. To preserve the banks would then require the "printing" of trillions.

It's still a completely ridiculous number and gets quoted entirely out of context to frighten people. I like how you guys like "this is just the amount the US could be theoretically liable for," which is certainly true, but is completely meaningless. I could theoretically **** Jessica Simpson and Carrie Underwood at the same time too, based on the existence of my pulse and ability to maintain an erection. The only utility in talking about Jessica Simpson and Carrie Underwood tag-teaming me and you guys talking about having $23 trillion in commitments and all the scary exciting danger that entails is for our own gratification.*

We had this thread before:

http://forumserver.twoplustwo.com/41...system-539512/



*If my wife is reading this, jk sweetie, I always dream about you ldo

Not even theoretically. Unless?

what's up with all these threads stating the obvious popping up recently? Tell me something that I don't know. Heck I wouldn't be surprised if the bailouts reach 100 trillion.


Now, for something new http://www.youtube.com/watch?v=0FofNyVY-wY

Wat. Just like they didn't have to scramble to find $1T?

Yes, I read the article. It glosses over the actual threat by addressing a strawman (ZOMG NOTIONAL!!!11). Margin calls become part of the threat when institutions can't meet them. They start selling assets to get dollars to meet the margin calls, all at the same time, which crashes the value of said assets, revealing said institutions to be overleveraged and undercapitalized, which initiates collapse, which requires the Fed to print trillions to keep them afloat.

Some of this should sound sort of familiar to you.

Your analogy was bad then and its bad now. Weather or not you nail Jessica and Carrie at the same time is a binary outcome (or I guess you could nail just one and then there are 4 possibilities) and this is not remotely true of the backstops put in place by the US gov.

First of all each of these obligations is linked. Housing prices fall -> losses for Freddie and Fannie -> likelihood of recovery drops -> likelihood of US default on treasuries increases -> value of treasuries fall -> treasuries represent fannie and freddie capital -> losses for fannie and freddie. There are going to be many such feedback loops built into the system because that is the way the system is set up. What many called a black swan when Lehman failed and AIG threatened to collapse was not a chance occurrence of many factors coming together at once- it is a predictable outcome of FRB- when every bank has more loans out than hard assets (by a factor of 10-1) then any one collapse can become systemic.

The final size of the obligations do matter, and they matter a lot. Its not because 23 trillion is so much money that it would bust the US government- its that 5 trillion probably would, or 2.5 trillion. Even 1 trillion at the wrong time or the right speed would. The largest loss allows us to figure out what (or guesstimate) what % loss can be taken by the system.

Economic ignorance is not something to take pride in. But its easier to pretend and believe in fairly tales.

I can't believe you cited that article...lol

Guaranteed this guy does not even have a job in finance...

The problem with Trillions of dollars of derivatives isn't in the size of the notional. It's the fact that they link financial institutions into a web of interdependence where the collapse of one institution causes a cascading effect as collateral calls and realization of marks occurs across the world. Because no single clearing house exists to net payments (or to assure that this has already occured) and provide clear disclosure of risk to investors, this triggers further flight of capital and the whole show comes to a stop. Smaller notional worldwide = smaller risk. Is this so difficult for you to understand?

I didn't use that analogy last time.

You didn't understand really a single thing of what I wrote. That housing prices are tied to the the liklihood of US default has nothing to do with screaming about 23 trillion in obligations is hysterical ******edness. Another analogy:

Yelling about 23 trillion in debt is like global warming alarmists sounding the warning bell that there's enough water (let's call it 23 trillion gallons to make the analogy perfectly clear) in the polar ice caps that if it all melted, every major city on Earth would be underwater:

If I made an OP that was like "UN watchdog says there's enough water in Antarctica to drown us all!!!", and you guys were all rightly like "okay, and...? Who gives a crap?", and then I was like "but the global warming feedback loops! A little bit of polar ice cap melting will make the seas warmer, and reflect less sun, and absorb more heat, and cause more melting, and...there's 23 trillion gallons of water in the Antarctic ice caps and if they melt we'll all drown!", you'd be right to point out that the "23 trillion gallons, we're all gonna ****ing drown!" is a non sequitur from "polar ice cap melting feedback loops."

The subtle goalpost shift of "even 10% of this number could sink the economy!" --> "23 trillion is meaningful" at least gets us to "let's talk about how 10% of this number is meaningful to us" but doesn't make the 23 trillion number any less fear mongery and ******ed. The "US has $23 trillion dollars in debt obligations" assumes that every home mortgage backed by Fannie Mae or Freddie Mac goes into default, and all the homes turn out to be worthless. It assumes that every bank in America fails, with not a single asset worth even a penny. And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless.

No, it's really not worth discussing. Partly because we all know the variables that get us to "23 trillion lost" have a zero percentage chance of occurring, but because even if you think the chance is non-zero, talking about scenarios in which anyone gives a **** about federal government obligations when every bank in America fails, any home backed by Fannie and Freddie is worth nothing and money market mutual funds and T bills turn out to be worthless too is like talking about what kind of rain boots we'll need when the polar ice caps melt entirely and we're all 10 feet underwater. The total number is meaningless, yelling about it is similarly meaningless, just as knowing about the total volume of water in the polar ice caps and yelling about that is somehow helpful to know what kind of risks global warming poses.

The sky has been falling for some posters since 2005 or whenever a politics forum was started on this site. Many people 5 years later are saying the same thing they were saying then.


http://forumserver.twoplustwo.com/41...apsing-510751/

http://forumserver.twoplustwo.com/41...ountry-314650/

Screw it was going to go back and find posts about people saying the sky is falling any second now throughout the forums history, but I won't. It isn't important. The important things to know are:

A. The sky is falling.
B. The sky is falling soon.
C. The sky is going to fall very shortly.
D. No way the sky is not going to fall.
E. I'm serious man it is coming down!

lol and then link posts from 2008 and 2009. Awesome.

I knew someone would say that which is why I put that I was going to go back. Trust me though, go look at some posts from back in the day and you can find the same thing. I'm just too lazy to go back and find something from each year so when I started at the current and moved back I thought screw it.

They exist though, just like all the exact same AC arguments and exact same statist arguments lurk in our past forum threads of 08, 07, 06, 05, etc. Nothing new under the sun. Cept the fact that the sun is getting closer as the sky moves in this direction at warp speed.

I understand what you're getting at here, but don't you think that some of those predictions from '05 have either come true or are much much closer to coming true?

I have no idea. Maybe, maybe not. Its just people are always predicting doom and gloom and have for a long time in the United States/the world. And maybe its a flaw in myself that I generally tend to roll my eyes or scoff at "look at this "fact" we are all officially screwed." Kinda like predicting when the world will end. Someone eventually is going to be correct, but a whole hell of a lot of people have picked different dates and times and have been wrong.

Then again I have never bought into any of the conspiracy theories about anything so maybe its just me.

And it also seems weird to me that a lot of people on this forum seem as if they would be happy with a worldwide global meltdown or countries going under and tons of people seriously suffering because of it. Maybe I'm wrong, but I certainly have gotten the impression from some people in this forum before that nothing could make them happier than their worst doom scenarios coming true. And that to me is much more scary than whatever fact or figure someone can point to today (or what fact and figure someone pointed to thirty years ago) of impending doom.

Well if you simply look at the financial situation we find ourselves in now compared to 5 years ago (or 10, or 15, or 20 or whatever), I think we can both agree that going forward we're getting much worse off with no end in sight. If (for example) the point of no return was passed in 2008, the system may limp along for 5 or 10 years before it collapses.

I guess I tend to see these posts as "If we don't do something to turn this around, we're ****ed." I see no reason that's not the case.

I don't think they would be happy if the world just melted down. As RP likes to say, it's a natural and predictable result of the fiat system. It's happened before, it'll happen again.

On the contrary, I see a lot of reasons to believe things are looking up for the future. And no telling how bad it may have been if some of the actions taken were not taken. Of course no one knows and that is the thing. I can't say we are so much better off because systems were bailed out anymore than someone can say we are so much worse because they were. No one knows. No one knows what would have happened, what could have happened, whatever. The people in charge took the actions they took thinking it was the best route. Were they right? Who knows...we may never know. Just like debating about if the atomic bomb needed to be dropped, you can speculate on what may have happened, but no one can be correct.

No reason for me to think that the economy is not getting better (many indicators say so). And if the debt is truly something that has to be fixed with the economy back on track who says it can't be? I tend to think most people on this forum look at the debt and then use slippery slope fallacy to assume the worst is coming and it is coming shortly.

I just don't usually see these posts as "let's get together and do something about this, more, ha told you the "guberment" was tards or told you we'd all go down with this." It doesn't seem like a call to action...it seems like a I want to be the first person to say I told you so. And that is a huge difference in my opinion.

In the end no one knows. The American economy in MY opinion has been worse off before at times throughout its history. And it has came back and the country has prospered. I predict it will again. And yet I know my prediction is no more likely to be true than the ones predicting doom. Because no one knows.