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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: LLCF who wrote (14880)8/30/2000 1:46:28 PM
From: pater tenebrarum  Read Replies (3) of 436258
 
David, it always comes back to the same thing: these derivatives may not be risky when looked at on a micro case-by-case basis. but they have introduced enormous systemic risk.

the sheer size of the notional values compared to the equity of the owners of these contracts is mind-boggling. it also shows that the financial economy has only a token relationship with the real economy...

and, this pile of derivatives isn't stress tested. if anything, the figures understate the amount of leverage in the system....GE capital is a good example for that. in an economic downturn we're going to see massive failures imo.
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