Saturday, November 26, 2011

BIS Reports OTC Derivatives Increased $107 Trillion in Past 6 Months

The BIS' latest semi-annual OTC derivatives report indicates that banks' over the counter (OTC) outstanding derivatives increased to $708 TRILLION as of June 30th, 2011, an $107 TRILLION increase from the $601 Trillion in OTC derivatives reported by the BIS as of 12/31/2010.

The problem with this report is that it is complete BS!   Not the $107 Trillion increase in the past 6 months, but the part that the total is anywhere near ONLY $708 Trillion.

In 2007 the official BIS numbers for total OTC derivatives were One QUADRILLION, one hundred forty-four trillion.  Since $1.144 QUADRILLION was a shockingly incomprehensible number, the BIS changed its method of valuation to a BS statistic called "value to maturity".   Value to Maturity assumes all instruments will perform and there will be zero bankruptcies of obligations.   (shades of FASB's capitulation to the banksters in 2009, right?)

The Bank of International Settlements reported a number that quietly slipped through the cracks of the broader media. Which is paradoxical because it is the biggest ever reported in the financial world: the number in question is $707,568,901,000,000 and represents the latest total amount of all notional Over The Counter (read unregulated) outstanding derivatives reported by the world's financial institutions to the BIS for its semi-annual OTC derivatives report titled "OTC derivatives market activity in the first half of 2011." Said otherwise, for the six month period ended June 30, 2011, the total number of outstanding derivatives surged past the previous all time high of $673 trillion from June 2008, and is now firmly in 7-handle territory: the synthetic credit bubble has now been blown to a new all time high. What is probably just as disturbing is that in the first 6 months of 2011, the total outstanding notional of all derivatives rose from $601 trillion at December 31, 2010 to $708 trillion at June 30, 2011. A $107 trillion increase in notional in half a year. Needless to say this is the biggest increase in history.
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