It’s all scarily derivative…
If you’ve not stumbled across The Money Project you should take a look. In its’ own words they aim ‘to use intuitive visualizations to explore ideas around the very concept of money itself.”
I found them via an article in Fast Co called ‘All The Money In The World, In A Single Chart’. Here’s the bit that grabbed my attention. The visualisation is based on each ‘pixel’ representing just over US79 billion. Or rather more handily, the net worth on one man (one Mr B Gates).
The first block is ‘Narrow money’.
This is all stuff we recognise as money – coins and notes and checking deposits. And it is an enormous figure. Nearly USD29 trillion.
The second is all Global debt.
USD199 trillion. So we owe nearly seven times more money that we actually have.
Just saying it doesn’t help. No wonder there’s always too much month in the pay.
The third is the low end estimate of the Global Derivatives market. The low end estimate.
USD630 trillion. Low. Staggering. It could be 710 trillion, but that hardly matters.
Don’t forget that Derivatives are effectively gambles. It’s the speculative contract of a value on a value of something. The something could be anything, rice, steel, gold, stock market swings. Derivatives “were mostly responsible for the 2007-2008 financial crisis” Kushal Agarwal pointed out here.
So…. if I’m reading this correctly, there’s nearly (or at least) 22 times as many promises on the worth of something as there is ‘real’ promises on the value of something. That’s a lot of trust to take on face value.
Too much information? In this case, possibly…
Feature image by Robert Hunter which is definitely not derivative but it’s slightly scary.