The Biggest Bubble Ever: Global Financial Aggregates Break $1.8 Quadrillion

Nov. 12, 2019 (EIRNS)—Officially reported global derivatives rose sharply over the last six months, according to the latest BIS report, which means that the actual total international financial aggregates (derivatives, debt, stock market valuations, etc.) have now surpassed their 2013 peak, reaching a total of $1.8 quadrillion as of June 2019, according to EIR’s estimates. (EIR estimates that the actual notional value of derivatives is about twice the officially reported number.) If the current trend continues for the second half of 2019, we will ring in the New Year with $2 quadrillion in total global financial aggregates.

According to the Bank for International Settlements, notional amounts of over-the-counter (OTC) derivatives rose to $640 trillion at the end of June 2019. This is up from $544 trillion at end-2018—an almost 20% increase!—and the highest level since 2014. It marks a continuation of the trend of increase evident since end-2016. The vast majority of all derivative contracts, some 75% or so, are in interest-rate swaps of various complexities. That means that if and when the central banks lose control of their endless nightmare zero and negative interest rate regime, and interest rates make a sharp move upward, not just corporate junk debt will go down, but derivatives will explode.

The BIS also reports that gross market value of OTC derivatives—which supposedly nets out positive and negative values—also rose, from $9.7 trillion to $12.1 trillion (a 25% increase in a short period of time), led by increases in euro interest rate derivative contracts. This is the amount that bettors have immediately at risk, and could lose in the blink of an eye.

The BIS figures also show a significant rise in exchange-traded derivatives (rising from $94 trillion to $120 trillion in the last six months). So when you take it all together, along with debts and stocks, the global total financial aggregates is now at about $1.8 quadrillion.