Shadow banking system

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.


  1. 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!

  2. 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?

  3. 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.

Comments are closed.