Sunday, June 05, 2011

The current state of the world's shadow financial system

Remember my post on this subject on May 12?

Apparently, the size of the shadow financial system continues to balloon.

According to one source, unregulated global OTC derivatives alone amount to USD 600 trillion (to provide a comparison, the total amount of regulated financial trading is about three trillion a day).

Though various rules have been proposed and discussed by global, US and European legislators and regulators, hardly any have been finalised.

The G20 ministers set a deadline for full implementation of reforms by the end of 2012, but not a single country is, less than 18 months from that deadline, in any position to comply with that deadline.

In spite of the problems affecting the Euro, reform of the global monetary system is not even being discussed any more, as far as I can see. Led by the US, most countries in the world, continue to print money in unjustifiable quantities, and interest rates continue to be unhealthily low.

So we have unrealistic and increasing asset, commodity and equity prices - specially in emerging countries such as Brazil, Russia, India and China; correlation of supposedly diverse asset classes; leverage in the global financial system; and inter-dependency between the world’s biggest financial institutions as well as elimination of middle-sized financial institutions.

Watch out for a yet another bursting of the bubble, this time the bubble that has been created since 2008 or so. Sphere: Related Content

No comments: