Readings: CDS market, US debt, UK Banks
. . . when two parties to a single $10 million dollar trade each report their “side” of the trade, the amount reported is $20 million, which overstates the actual size by a factor of two since both reports relate to a single $10 million contract. When examining the outstanding amount of actual contracts registered in the Warehouse (not separately reported “sides”) as of October 9, 2008, credit default swap contracts registered in the Warehouse totaled approximately $34.8 trillion (in US Dollar equivalents). This is down significantly from the approximately $44 trillion that were registered in the Warehouse at the end of April this year.
- Prudent Bear: We interrupt this program…, by Satyajit Das
The US national debt as of March 2008 stands at US$9.4 trillion. This equates to over US$30,000 per person in the U.S. population or a little over US$60,000 per head of the U.S. working population. The US national debt has grown by US$3 trillion (50%) since 2000, when it was US$6 trillion. In 2007 alone, it grew by US$500 billion, from US$8.7 to US$9.2 trillion. In 2005, it was 67% of US GDP, up from 51% in 1988. Prior to the current crisis, the Office of Management and Budget projects that total debt will rise to US$12.3 trillion in 2013.
In July 2008, Richard Fisher, head of the Dallas Federal Reserve Bank, speaking in a private rather than official capacity noted that “the unfunded liabilities from Medicare and Social Security…comes to US$99.2 trillion over the infinite horizon”. This equates to US$1.3 million per family of four - over 25 times the average household’s income.
Royal Bank of Scotland Group Plc, HBOS Plc, and Lloyds TSB Group will get an unprecedented 37 billion-pound ($64 billion) bailout from the U.K. as governments across Europe act to avert a banking collapse.
The U.S. Federal Reserve, European Central Bank and the Bank of England will offer financial institutions unlimited dollar funds for the first time in an attempt to ease tensions in money markets. European leaders agreed this weekend to guarantee new bank refinancing, and use government money to prevent lenders collapsing. Germany is preparing its own rescue plan that may total as much as 400 billion euros ($540 billion).
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