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Strategies & Market Trends : The coming US dollar crisis
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To: Real Man who wrote (11844)9/26/2008 11:39:25 AM
From: dybdahl  Read Replies (1) of 71454
 
Ok - let's put some numbers on this:

Person A is worth $1 million and buys a derivative like this, contracting to pay $10 million. If the value of the purchase goes to $8.9 million, A is broke, and the bank loses $0.1 million, whereas person B, who has the opposite position, wins $1.1 million.

In other words, the net result is:

The derivative is nominal $10 million
A loses $1 million and is bankrupt.
B wins $1.1 million
Bank loses $0.1 million

So the collateral damage to the bank is 1% of the nominal value, and the total amount of money around is unchanged. There is no bogus money involved in this.

I still have a hard time to see that ALL tilting dominos are tilting other dominos. As far as I can see, only some of them do.

Can you please explain how my example makes the economy implode?
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