Derivatives are definitely a huge issue, but I'm not sure calling it a bubble really makes sense. The issue is that there's a lot of poorly-understood credit risk floating around. I haven't actually heard too much worry about banks making massive losses on their derivatives exposure, which means both the notional and real aggregate value of the contracts are probably not relevant because they net out to 0, both overall (which is true definitionally) and on a trader-by-trader level, because there's at least some level of hedging.

The danger is that if a big dealer of derivatives goes broke, its counterparties may be unable to recover on their bets, which is especially bad if they are counting on that bet to offset a liability they have.

omg bobman don't call them bets, people might realize what's going on

As I said, I don't get what you are saying. You say everyone is worth 10$ and I explained how that is plain and simply false. There may be a point where everyone holds 10$ of the money but people will still be worth more than the 10$.
You can call it trolling if you want, I call it fact. Your worth is not merely defined by the money you hold. Nor is average worth the average money everyone holds.

I made the assumption about wealth redistribution due to your comment about returning land to a land pool of sorts whih you haven't clarified yet.

The purpose of capitalism is satisfying wants efficiently.

Why then do people hoard the resources? I guess they are just stupid?

From what I can tell, mainstream media is spinning the market today as a reaction to optimism that the bailout package would still go through, as opposed to just being, you know, a market.

Its acorrding to the BIS- not that I'm saying that the BIS might be making up numbers, but it is their job to keep track of markets.

Lets suppose it really is 500 trillion. Or 250 trillion or w/e. Nobody has that much money, so when people do need to start collecting on their derivatives whats going to happen? I understand that the money doesn't actually exist. Isn't that the problem? Isn't that why its being called a bubble?

Can you say "Dead cat bounce?"

However, I really really hope it's not...

My read is that the Market thinks enough arms are going to be twisted, that a revised bailout plan will eventually be passed.

I don't really understand it well, but in my mind it's like an option, if the underlying security is volitile, the effect is amplified in the option. Somebody tell me if that's way off.

Yeah... What he said.

Grunching, but this is showing that Congress is exactly the opposite of independent.

Look at the vote record - the people who voted it down are nearly universally those who are up for reelection soon. They aren't doing the independent thing, they're doing the popular thing.

As soon as the stupid schmucks said "we're going to table it and put it online for our constituents to review", the chances of it being voted down went up by 1000%.

My understanding of the whole thing is that you have people gambling in the derivatives market with money they don't have.

They then count those derivatives as assets which allow them to lend out more money creating a nasty cycle.

Now that some of these MBSs are coming in, its triggering a domino effect.

The entire House is up for reelection every 2 years. Perhaps you mean those in close races?

Yes, but as I'm trying to say, there are multiple ways of counting.

I enter into a swap with notional $100m. So we both report derivatives books of $100m ($200m total). I offset the swap with a matching swap with amplify. So I have $200m of total derivatives outstanding, but zero net exposure, you have $100m and amp $100m, for a total of $400m. But in reality, the total market value of the swaps might be only 1% of the notional - $1m in total flows from you to amp. So even the BIS can report a number which is not useful, except to report how thriving the derivatives markets are, or how dangerously large they are, depending on your view.

Day 1: There are 5 people. There are $20. One is a trapper who captures meat. He is able to sell meat at $1/lb and still meet the demands with his trapping.
Day 500: There are 20 people. There are still $20. Four are now trappers who capture meat. The supply and demand of meat have both increased about the same amount, so the meat still has the same "worth", whatever that is. But, the demand on money has gone up by 4x, and the amount of money is the same, so now the trappers are selling meat at $0.25/lb.

On day 1, I had a dollar. I put it in my pocket and left it there.
On day 500, it could now buy 4x as much as it could on day 1. What a great investment I made, keeping money in my pocket!

Now obviously I've pulled numbers out of my butt here, but the point remains - the demand on money is going to go up relative to population, which is exponential. Unless investment into production is ALSO going to give an exponential return (and I don't think that's realistic, but I don't have much to support that so feel free to demonstrate that I'm wrong), then the best investment policy is to keep money rather than anything else; I'm going to offer barter options to people whenever possible, etc., to keep as much of the actual money as I can, because it will be worth so much more if I keep it. This collapses the whole purpose of money, which is to have a useful medium of exchange.

Stephen I was with you until the last sentence.

It's impossible to say because "derivatives" is such a broad term. There are a zillion different scenarios. E.g.,:
-The derivative is an interest-rate swap. Periodically, one of the parties ships the other some amount that represents the difference between floating and fixed interest on the notional amount. The notional amount never gets collected by anyone.
-The party holds the derivative to hedge against another risk. For example, a party is short an option at a certain strike price with party A, but long the same option at a lower strike with party B. If the transaction is unwound, the party will mostly be forwarding money from party B to party A and then kicking in a small premium to cover the unhedged exposure.
-The party is just speculating, ends up owing a huge amount, and goes bankrupt. Everyone else has to line up and try to collect on their debts through insolvency proceedings.

why does the house close for jewish holidays? What other holidys does it close for?

christian ones. islamic ones, we stay open late.

I would assume most of them. Maybe not Arbor day but if you could just decide to take certain days off wouldn't you?

Well your time preference for the meat seems to be low on day 1. Once again, why should you not be allowed to keep the $?
If you think that the potential profit of a raise in the goldprice is worth more to you than the ownership of a unit of meat, keep the unit of gold.

Of course you can. But it's not one individual's act that's the problem, it's when a significant proportion of pwopl start to do it,

How is that?
Let's take the most extreme case. All the people that own money decide to hoard it right now. How would you compare the benefit that each hoarder gains from the hoarding to the losses that people suffer from not having a money?

Furthermore, how long do you think everyone can hold onto the money before deciding that hanging on longer to the money is dominated by other wants (the desire for any product that one cannot or does not want to create).
How do you think these people would react once someone suggests to use another commodity for indirect exchange?

It's easy to come up with doomsday scenarios but it's another thing entirely if they make sense. For example, why would people hoard money but not grain, cars or any other product?

Because the value of money is increasing exponentially, and the value of those other things is not?

If I have $1, and I know in a year it will be worth $4, but I can convince buddy with food to trade me his food for my knife, then I'm keeping the money and getting the food, because it's worth more tomorrow.

If I do it it's no big deal. If everybody does it, there's no money being spent.

One could argue that money is just a barter item, which I think is where you're going with this (you can just say what you mean, btw). But it's a far more convenient barter item than a car.

BTW, I read that article you posted, and it was very interesting, and I will likely be reading more on that site. Still not sure if I agree with the basic concept of the system, though.

I'm not sure that it was common knowledge, but at least chim and I discussed it a few times back when 3+ turboes a day were going. I found his AIM name pretty jarring before I got used to it.

well, foolish me thinking the bailout was dead

apparently its still very much alive. The line today in the media is definitely what Amp (and Mark too I guess) said.

The Senate is apparently meeting tomorrow to vote which is supposed to pressure the house into the passing the vote.

The media is still pimping this bailout very hard and the Dow comeback today seems to mean little to them.

Does anyone here think the media has been objective in its coverage of this?