America's False Economy

Personally I think that America's financial sector is based on non-existent money, so much so, that its insane.

Exhibit A:

The Federal Reserve “’provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world’” (emphasis added) (The Fed Audit - Newsroom: U.S. Senator Bernie Sanders (Vermont))


Exhibit B:

The derivatives market is worth more than the world's financial assets

(How can the derivatives market be worth more than the world's total financial assets? - By Jacob Leibenluft - Slate Magazine) (Big Risk: $1.2 Quadrillion Derivatives Market Dwarfs World GDP - DailyFinance) (The $600 Trillion Derivatives Market - The Daily Beast)


Thus, I wanted to know what you guys thought? Do you think the entire financial sector is nothing but lies and deceit, or is it based in reality?

Entire? No. Entirely too much? Yes.

Based on the first link, it's the calculation that arrives at $567T that is false.

An alternative way to measure the size of the derivatives market is to calculate the instruments' market value—which refers to how much they would be worth if the contracts had to be settled today. Gross market value of all outstanding derivatives was $14.5 trillion at the end of 2007, less than one-fortieth of the $596 trillion estimate. (That number shrinks to about $3.3 trillion once you take into account contracts that directly offset one another.)

Click to expand...

Much more in-line with the economy.

That's not to say the financial system likely doesn't need much stiffer regulation and enforcement, I think it does. Mortgage crisis was similar to many of the other big crisis we have had. But given governments terrible track record, how can we expect that will ever change.

Mr. Invisible said:

Personally I think that America's financial sector is based on non-existent money, so much so, that its insane.

Thus, I wanted to know what you guys thought? Do you think the entire financial sector is nothing but lies and deceit, or is it based in reality?

Click to expand...

You got it right.

A friend of my calls it "vapor". Wealth that is really non-existant, financial transactions that are based upon nothing, valuations that are valueless, an investment rating system which is fictitous.

It's all been invented by some really creative people using smoke and mirrors. And they totally have us fooled. When I ask specific questions about this stuff, people tend to give me answers like "it's really complicated and you are too stupid and ignorant to understand and the guys on Wall Street get paid so much because they are the only ones who are smart enough to understand the complexities of our system.

Few people ever question if all this high finance stuff isn't just made up. We constantly hear of bigtime financial scams, one after another and they are seemingly endless. The dot com fiasco, Enron, Tyco, major banks, insurance companies, Madoff etc. Until these things crash, we accept them to be something great, and we don't ask questions because when we do, we are told that it is "all over our heads".

About 10 years ago, when Napster was all in the news, I kept on asking people where Napster was getting the money to run all of these servers and how they were able to afford their legal battles. People kept telling me that Napster gets paid a few pennies for every song that someone downloads. I kept asking who was paying them to illegally distribute intelectual property, the answer always was "I don't know but someone is". Now Napster never charged the users a dime, Napster didn't sell anything, not even advertising, certainly the artist were paying napster to rob them of their assets, certainly the record lables werent doing it either. So who was this mysterious "someone"?

Now we are being told that a company which has never made a dime in profit, which has revenues which are less than a billion dollars, which has a product which is rapidly dropping in price, which has vowed to never charge for their service, which is having to take in around $500 million dollars each year in new investment just to to keep operating is worth $80 billion dollars. That's absolutely absurd. And who is making the claim that this company is worth so much? The big banks that failed a couple of years ago. Why would we ever even consider believing a company that can't even operate itself and which has made such enormouse finacial mistakes and bad judgement?

And why do we even care what rating that the rating companies give to the US government debt? These rating companies have already discredited themselves and are well known to be corrupt.

My granny once told me that "if it seems too good to be true, it probably ain't."

How the economy works:

...umm....the derivatives market? As in, every derivative floating around out there in the world? I'm not surprised. You can securitize just about anything. But I fail to see how this makes Wall Street money "imaginary." Venture capital for up-and-coming businesses is imaginary? Mergers and acquisitions are imaginary? Making some sort of asset-backed derivative and giving people greater access to loans or equity is "imaginary?"

Total government and private debt in the USA alone is 65 trillion dollars, which is bigger than world GDP.

The stock of global liquid financial assets is greater than world GDP.

Global container trade (and trade in general) grows at a higher rate than world GDP.

I mean...why not? Global GDP is a snapshot of how things are now. The global derivatives market includes investment vehicles and pretty much all of those things, plus how they might be in the future. You'll double, triple, quadruple, quintuple, (etc.) count everything in the world.

The OP doesn't mean much.