Adele Ferguson | October 18, 2008 Article from:  The Australian

IN 2002, legendary investor Warren Buffett warned that derivatives were time bombs and “financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system.

Instead of heeding this oracle’s warnings, financial institutions rejoiced in these ticking bombs, which have now blown up, leading to estimates that the global banking system will lose up to $1.4 trillion before the crisis is over.

The world financial system is leveraged beyond comprehension. It is estimated that between $US500 trillion ($732 trillion) and $US700 trillion worth of derivatives are outstanding.

Compare this with the total economic activity (GDP) of the world, which is about $US50 trillion, and even a 5 per cent drop in the value of the derivatives is beyond the rescue capability of the world’s central banks, according to financial author Bert Dohmen in his Prelude to Meltdown.

These

Adele Ferguson | October 18, 2008 Article from:  The Australian

IN 2002, legendary investor Warren Buffett warned that derivatives were time bombs and “financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system.

Instead of heeding this oracle’s warnings, financial institutions rejoiced in these ticking bombs, which have now blown up, leading to estimates that the global banking system will lose up to $1.4 trillion before the crisis is over.

The world financial system is leveraged beyond comprehension. It is estimated that between $US500 trillion ($732 trillion) and $US700 trillion worth of derivatives are outstanding.

Compare this with the total economic activity (GDP) of the world, which is about $US50 trillion, and even a 5 per cent drop in the value of the derivatives is beyond the rescue capability of the world’s central banks, according to financial author Bert Dohmen in his Prelude to Meltdown.

These