Forbes: Next Financial Crisis Will Be Hellish And It’s On Its WayJune 3, 2011 0 Comments
Forbes reports the following on the dismal state of the global economy:
“There is definitely going to be another financial crisis around the corner,” says hedge fund legend Mark Mobius, “because we haven’t solved any of the things that caused the previous crisis.”
We’re raising our alert status for the next financial crisis. We already raised it last week after spreads on U.S. credit default swaps started blowing out. We raised it again after seeing the remarks of Mr. Mobius, chief of the $50 billion emerging markets desk at Templeton Asset Management.
Speaking in Tokyo, he pointed to derivatives, the financial hairball of futures, options, and swaps in which nearly all the world’s major banks are tangled up.
Estimates on the amount of derivatives out there worldwide vary. An oft-heard estimate is $600 trillion. That squares with Mobius’ guess of 10 times the world’s annual GDP. “Are the derivatives regulated?” asks Mobius. “No. Are you still getting growth in derivatives? Yes.”
Hey Forbes, this estimate of the derivatives market is too low. I wrote a blog article almost a year ago on www.wilmott.com regarding the estimate of the size of the derivatives markets: $1.2 Quadrillion Derivatives Market Dwarfs World GDP