Thursday, September 25, 2008

CDSs Part II, From $0 to $62 Trillion in 7 Years

Eight years ago, we survived the millennium bug, Bush won due to inefficiencies in the electoral college system, and credit default swaps were a thing of fiction. They simply didn't exist. Today, they amount to over $62 trillion. To put that number in context, I graphed CDSs next to the paltry US Gross Domestic Product, and also next to the total market capitalizations of both the US stock exchanges, and the aggregated world stock exchanges. Said another way, the stock market capitalizations represent every stock of every company listed, times the number of stocks outstanding. And yet, CDSs - instruments that most people have never heard of - insure an amount six times greater than the US GDP, and more than every stock market in the world put together.

Data (comma delimited, in millions)
US GDP,9817.0,10128.0,10469.6,10960.8,11685.9,12421.9,13178.4,13807.5
NYSE + NASDAQ,15131.6,13766.3,11009.8,14173.1,16240.5,16914.6,19286.2,19664.5
All World Markets,31125.4,26904.9,22809.6,31325.8,36863.3,40974.1,50791.7,60874.4
Credit Default Swaps, - ,918.9,2191.6,3779.4,8422.3,17096.1,34422.8,62173.2

US GDP Source: Bureau of Economic Analysis (link)
Credit Default Swaps Source: ISDA (link)
Equity Market Capitalizations: World Federation of Exchanges (link)

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