Hello Mr. Wolf, won't you please sit down?

[EightFingers]

"... 500 trillion dollars of bad debt ... "

Isn't this about $140,000 for every person in the US?
36 YEARS' worth of USGDP (This year was 13.84 trillion)
The figure you cite seems extreme to me.

[JWFITZ]

But, one thing I do find pretty encouraging in all this.

I mean, really, I do--is that people are actually thinking about stuff a bit, which is a pretty uncommon thing.

The amazing lack of interest in the "sustainability" forum is telling. A year ago the same thing generated a fair bit of interest. By now, those people who were interested or newly introduced to the concept of sustainability have sufficiently evolved to the point that they're actually engaged personally in a bit of sustainability, or at least become very aware of the fact that there a lot of profit based "minimalism" out there. It isn't that there's a lack of interest per se, it's that most have moved way beyond all that. While many a bit behind the curve are still caught in the notion of green certification and green consumption--it's clear to me that most have seen all that for what it is and the persuadable public, by and large, has leapfrogged the whole eco-industry and moved into something new. They are not looking to change their lightbulbs, they're looking to change their lifestyles. That's wonderful. It's important to realize that the new ecologists aren't ideologists--they're engineers. And they know that there isn't ever any such thing as a new 2500 square foot green house, that it's outright BS--scale is everything, and that ecological destruction immediately creates real effects. While there's still a lot of vocal eco****erism out there --http://sanityandsimplicity.blogspot.com/...erism.html -- most people are becoming very aware that we're all screwed and unless we live in a markedly--markedly--different manner we're in for a very difficult future. Since most of us have learned that our previous way of life was all but bankrupt anyhow--many more are considering things that they simply didn't before.

[JWFITZ]

500 trillion is a conservative estimate. A little research will bear that out.

[JWFITZ]

Here's a link to back all that up from two knowledgeable guys: Buffet and Gross.

http://www.marketwatch.com/news/story/de...24B59D436}

Sorry, for some reason I can't get this link to work right. You'll find it with a little poking around.

[PaulW]

500 trillion = 500 million million
Population USA = 300 million

500 million million / 300 million = 5 million / 3 =

$1,666,666.66 per person. $5M per household.

I'd like to see that research.

[PaulW]

www.tinyurl.com is good for links that are too long:
http://tinyurl.com/d4f9lk

The article talks about a world-wide $500 trillion dollar derivatives market,
and that maybe 2% of it is bad.

[EightFingers]

PaulW, You're closer to right, my calculator "slipped a few digits" (Hey, what's a few billion here or there???!)

[JWFITZ]

Thanks for clearing that all up.

The point of the article is that even a 2 percent rate of default can endanger the whole pile. Which, of course, is the problem in a nutshell. And we're well beyond 2 percent at this point. Unfortunately the article is a year old, but effectively gives a sense of scale. Unfortunately we have no means at the moment to value any of that "stuff" which is at the root core of our financial crisis. Disagreement in how much any of that is worth is the crux of the issue. Many, obviously, believe the answer is "not much."

[mgeary]

quote:

---

Originally posted by JWFITZ

500 trillion is a conservative estimate. A little research will bear that out.

---

Here's the product of a little research, Jay: http://www.bea.gov/national/FA2004/TableView.asp?SelectedTable=28&FirstYear=2002&LastYear=2007&Freq=Year

It shows that the "Current-Cost Net Stock of Residential Fixed Assets" is $17.9 Trillion dollars. All of the residential property owned in the United States by private individuals is worth that much. I don't understand derivatives, nor do I know how they are valued. I do understand that there is only a little less than $20 Trillion dollars worth of privately owned residential property in the United States, which is several orders of magnitude less than $500 Trillion dollars.

Aloha! ;-)

[JWFITZ]

No question that is true.

Of course, it would be important to understand how derivatives work, and how they are valued, and what they are "derived" from, to take the next step in understanding the issue. And of course, residential real estate is only one small part of the issue. Derivatives have been issued on all asset classes, including themselves. This is how you get a market that is a bit over 10 times global GDP.

http://en.wikipedia.org/wiki/Derivative_(finance)

Certainly understanding that a market derived from an underlying asset class that isn't worth 10 percent of the larger market is a step in the right direction.

Lastly, the basis of financial interaction is disagreement of what valuation is. By and large the world investment community doesn't think those instruments are worth much. If anyone disagrees with that--well, Citigroup is about a buck a share.