Shadow banking system
Bob Morris @ Mar 24th 2008 14:30 - Category: Credit crisis
Global Guerrillas runs the numbers on the unregulated shadow banking system that has no lender of last resort (like a central bank) standing behind it because the entities involved for the most part, aren’t banks.
Total value of the shadow banking system (unregulated and unsupervised): $516 Trillion.
US GDP ~ $13.86 Trillion (PPP).
Positions held by Bear Sterns ~ $13.4 Trillion (underlying assets ~ $80 billion).
Positions held by JP Morgan Chase prior to Bear Sterns acquisition ~ $77 Trillion
Some, maybe most of those numbers are trades that balance each other out. But even with that, you’re talking trillions in unregulated, difficult to understand and sometimes even harder to sell securities. This is why the credit markets are freezing up. No one trusts any one because who knows what hidden financial icebergs might come crashing into the hull unexpectedly.
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DJ on 24 Mar 2008 at 7:15 pm #
Wow: I had no idea the GDP was that low. US GDP is $13.5 trillion. US National Debt is $9.4 trillion. That means the debt is 70% of GDP. Ouch!
Ten Bears on 24 Mar 2008 at 11:06 pm #
I’m a little hazy on this, but wasn’t Gross Domestic Product (or production), like inflation indicators to exclude food and fuel, changed a few years ago to Gross Domestic Output? Or do I have it backwards?
Bob Morris on 25 Mar 2008 at 8:54 am #
I’m not sure about those. However the Core Inflation number does have oil and food excluded, making it a number often mocked as useless by financial media and blogs.