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The Invisible One Quadrillion Dollar Equation

DK Matai - September 28, 2008

Dear Friends, according to various distinguished sources including the Bank for International Settlements (BIS) in Basel, Switzerland -- the central bankers' bank -- the amount of outstanding derivatives worldwide as of December 2007 crossed USD 1.144 Quadrillion, ie, USD 1,144 Trillion.

The main categories of the USD 1.144 Quadrillion derivatives market were the following:

1. Listed credit derivatives stood at USD 548 trillion;
2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD 596 trillion and included:

a. Interest Rate Derivatives at about USD 393+ trillion;
b. Credit Default Swaps at about USD 58+ trillion;
c. Foreign Exchange Derivatives at about USD 56+ trillion;
d. Commodity Derivatives at about USD 9 trillion;
e. Equity Linked Derivatives at about USD 8.5 trillion; and
f. Unallocated Derivatives at about USD 71+ trillion.

Quadrillion? That is a number only super computing engineers and astronomers used to use, not economists and bankers! For example, the North star is "just" a couple of quadrillion miles away, ie, a few thousand trillion miles. The new "Roadrunner" supercomputer built by IBM for the US Department of Energy's Los Alamos National Laboratory has achieved a peak performance of 1.026 Peta Flop per second -- becoming the first supercomputer ever to reach this milestone. One Quadrillion Floating Point Operations (Flops) per second is 1 Peta Flop/s, ie, 1,000 Trillion Flops per second. It is estimated that all the data found on all the websites and stored on computers across the world totals more than One Exa byte of memory, ie, 1,000 Quadrillion bytes of data.

Whilst outstanding derivatives are notional amounts until they are crystallised, actual exposure is measured by the net credit equivalent. This is normally a lower figure unless many variables plot a locus in the wrong direction simultaneously. This could be because of catastrophic unpredictable events, ie, "Black Swans", such as cascades of bankruptcies and nationalisations, when the net exposure can balloon and become considerably larger or indeed because some extremely dislocating geo-political or geo-physical events take place simultaneously. Also, the notional value becomes real value when either counterparty to the OTC derivative goes bankrupt. This means that no large OTC derivative house can be allowed to go broke without falling into the arms of another. Whatever funds within reason are required to rescue failing international investment banks, deposit banks and financial entities ought to be provided on a case by case basis. This is the asymmetric nature of derivatives and here lies the potential for systemic risk to the global economic system and financial markets if nothing is done.

Read the full article here.

Conclusion

In the context of the USD 700 billion rescue plan -- still being finalised in Washington, DC -- the following is worth considering step by step. Decision makers are rightly concerned about alleviating immediate pressure points in the global financial system, such as, the mortgage crisis, decline in consumer spending and the looming loss of confidence in financial institutions. However, whilst these problems are grave, they are acting as a catalyst to another more massive challenge which may have to be tackled across many nation states simultaneously. As money flows slow down sharply, confidence levels would decline across the globe, and trust would be broken asymmetrically, ie, the time taken to repair it would be much longer. Unless there is government action in concert, this could ignite a chain-reaction which would swiftly purge trillions and trillions of dollars in over-leveraged risky bets. Within the context of over-leverage, the biggest problem of all is to do with "Derivatives", of which CDSs are a minor subset. Warren Buffett has said the derivatives neutron bomb has the potential to destroy the entire world economy, and is a "disaster waiting to happen." He has also referred to derivatives as Weapons of Mass Destruction (WMD). Counting one dollar per second, it would take 32 million years to count to one Quadrillion. The numbers we are dealing with are absolutely astronomical and from the realms of super computing we have stepped into global economics. There is a sense of no sustainability and lack of longevity in the "Invisible One Quadrillion Dollar Equation" of the derivatives market especially with attendant Black Swan variables causing multiple implosions amongst financial institutions and counterparties! The only way out, albeit painful, is via discretionary case-by-case government intervention on an unprecedented scale. Securing the savings and assets of ordinary citizens ought to be the number one concern in directing such policy.

[ENDS]

We welcome your thoughts, observations and views. Thank you.

With love and warm wishes to you and family


DK with family

DK Matai

The Philanthropia, mi2g.net

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Posted by DK Matai at September 28, 2008 12:19 PM

Comments

Dear DK,

thank you, this was fascinating. So you mean that there is a quadrillion dollars that are invisible, but if we find them, the global economy will be saved?

Sorry if I'm wrong, but this is what I understood from the financial talk above...

The obvious question would be... where is that quadrillion now? Lol... it is funny beyond measure... I am sorry to be laughing in such a serious situation, but I've never understood how the world's economies have rested on inexistent value for so long. We need to find the value behind the money, and then the quadrillion dollars will arrive from wherever they are, I guess.

love,
aurora


Hi DK,

Your last sentence makes sense:

"Securing the savings and assets of ordinary citizens ought to be the number one concern in directing such policy."

If the financial world will be able to do that, then they show, for the first time in their lives, humility.

But up till now this has always been something a citizen also knows and up till now he/she had to take care of this him/herself.

It would be a big big shame on the financial world if, after all these years the ordinary citizen would have to go back to keeping his money in an old sock again.

Yet, many suggestions are already given to do just that to those same ordinary citizens.

Because of exactly those ridiculous amounts of money that are involved nowadays.

No normal citizen is able to keep track of such large amounts of money anymore. And just by making it so complicated those with inside knowledge will survive and I do not think this is fair.

But I still believe that evil will punish itself in the end, whether through a financial collapse or through the large hadron collider who is certainly able to end every life on earth, which I already have experienced, the second big bang.

But then don't worry, there will be another universe at ones disposal again, to start all over.

Lol,if you believe in myths and then especially the great Atlantis myth, then we are bound to make all the same mistakes again.

Perhaps this is the ultimate game of the infinite player, to constantly recreate everything.

If only one could learn something and end up at a higher level!!

Yep, sounds like reaching for the stars! Just make some more paper money or those really expensive-to-use plastic cards!

I desire to see the bank that 'runs' come down!

What goes up will come down what comes down will go up. Knowing this a man of knowledge neither goes overboard in enjoying things in good times nor gets overly dejected in bad. Doing his level best to reduce suffering in bad times he keeps his mind in equipose under all circumstances.

As to doing our level best:

As per my four forces theory, the coming times are ushering us into The Old Age of the global cultural cycle. So ultimately we need to do what we need to do in our individual old ages which we know by experience of our elders and by common sense. And that is:

1. Give priority to saving what you already have over earning more.
2. Try to keep your principle intact while spending.
3. Curtail your needs more and more or spend less and less.
4. Develop stoicism.
5. Seek enjoyments in pursuits which demand no or least amount of money.
6. Slowly cut yourself from globalisation to localisation.
7. Try to be self-reliant as far as possible.

Aloha DK

Interesting how 2012 is bringing us into balance. With fractal evolution we are a flowering consciousness. Yang energy is the numbers you see, yin energy is what you don't see. click my name for an interesting site explaining Chi-Quantum Healing. On the left column below the white box is the Documentary of Quantum Healing and Foundation of Project of Qi. ove patty

Hi Harb,

Your list of doing your level best is something we here in my country grew up with. One can find it back in a lot of our Dutch sayings.

Perhaps it is America after all and its dream that one can reach for the stars that has caused all this turmoil in the world.

And I will have to add all those self help books that have been written in the past 30 years, although I must admit that they helped lots of people in getting a more positive look on themselves.

And a few, as always, raised above themselves and were able to reach a star. But most of my generation are happy if they are still healthy in body and mind and have reached inner peace to a certain extent.

But it is very hard in these days, especially for the younger generations to believe that they are that special and that they are able to make their dreams come true. Especially with to much greed that has been shown up till now on those Wall Street and other financial ramparts.

Ordinary decent hardworking people know that they cannot spend money that they do not have, yet advertising etc. continuously tell them they can.

On has to stay firmly rooted on the ground to not fall for this indoctrination.

Mieke

Hi DK, thanks for the information.

Perhaps since most of the people that concocted the current system are dead there is no one left that really understands it and it's flaws. I understand a good portion of it because I have worked in Banking and Finance for about 20 years and I have had to architect and program the actual logic that underlies finance and accounting systems. I have worked with every aspect including Automated Clearing House Transactions and Electronic Funds Transfer. I probably understand the system internals like few else on the planet; I do not claim to understand all the gaming mechanisms that have been created that exaggerate the original flaws.

What I do understand is the proper way to design the system, one that works.

All these recently concocted complex financial instruments that I don't entirely understand seem to be nothing more than smoke and mirrors, worthless bogus paper the value being simply perception based. If they were real we could understand them but they are really illusions.

I have no doubt that the illusions will be shattered soon.

I have put together material designed to help bring enlightenment regarding monetary systems to destroy the illusions and the systems built on them. What I have noticed though is people have been so indoctrinated in the ways to think about money they at first have a problem grasping the reality of the financial systems hidden behind the illusion.

I would suggest everyone read and understand at least these 4 articles on CoinAge.me

Holistic Economic System and Principles
New Economics 101
New Economics 102
The Solution a New System “Currency with a Brain”

{click my name}

Aloha Richard

I enjoyed your analogy of a false bottom:) with the banking industry. We are a piece meal. love patty

"The only way out, albeit painful, is via discretionary case-by-case government intervention on an unprecedented scale." ~Article above.

I disagree the only way out is to destroy the illusions.

Let’s start with the illusion maintained in that statement.

There is no such thing as government intervention. A label cannot intervene. When we say government the reality is we are talking about the collective effort of the citizens if it is a real Democracy of self rule and not an oligarchy of a few ruling the many.

When we are talking about citizens we are talking about the economic system participants. So we are saying the economic system participants need to intervene? How would they do that? Give up a greater percentage of the wealth (value) they create in the future to give to those that create nothing more than a perceived value or fabricated need? Does it mean that they are really an indentured servitude that will need to work harder retaining less of the value they create?

How is it the people, the citizens are going into debt to create money (out of thin air with an accounting entry), and then have it loaned back to them at even more interest? Going in debt to who we might also ask? Who are these middlemen that serve no valuable purpose except to themselves?

If the people, the “government” is going into debt then shouldn’t the money go into their bank accounts right away? Why should the people have their own money loaned back to them in this way passing through many hands which each take a cut? Is it by design to allow a disproportion distribution to ones friends and acquaintances first?

They only people in a “pure” system that the economic system participants can go into debt to is other economic system participants. As a whole the economic body cannot go into debt to itself now can it? Unless we are speaking of going into the debt of those that control the symbol and the accounting system?

Is there anybody on the planet that hears me or do I need to press the reset button have it all started over and rebuild from scratch? The planet will suddenly go local.

I think some are going to need to give up all that illusionary wealth they think they have, if not it will happen of it's own accord in a very uncomfortable manner.

The currencies of the world are based on an illusion, the illusion that the system is being properly maintained to facilitate equitable balanced value exchange.

Click my name and read "The burst of the fiat currency bubble"

New Economics 101

Value consumed must equal value produced by all participating entities. The value exchange accounting system must properly measure and maintain this balance. The service providers hosting the system must be efficient in doing it at a very low cost, in a competitive environment, and there cannot be a monopoly by a few on the creation of monetary units. Where feasible each economic system participant would support part of the physical and technical infrastructure of the whole. Value is determined by the sum of the individual choices. Artificial value is vetted and removed from the system. Forced patronage of products or services especially those with artificial value or based on created need is eliminated. Inflated pricing / cost resulting from monopoly are also eliminated.

Credit Pipes must equal Revenue Pipes and must balance at 30 days, 90 days, 120 days, 1 year

Services needed to be provided to support a financial systems.

-Tracking transactions and ownership.
-Providing the computers, logic, interface and network to run the system.
-Identity / Entity registration tracking and certification
-Risk analysis and evaluation (this is capturing historical data (prior performance), analyzing future possibility and probability to determine future need for specific services and products and the entity’s success in creating value and prior performance in meeting obligations to produce value.)
-Investors (directing energy in a free market to entities that after discerning investigation are deemed to be able to create value for other economic system participants, this is a collective function so that investment flows cannot be skewed by a few individuals.
-Enforcement (recovering collateral or providing penalty for not honoring the commitment to create future value.

All these financial services and products can be provided much more efficiently and effectively than they currently are.

The things that can skew a natural economic system.

-Leakage those that can take ownership ship of currency units (wealth) without making a real value contribution to other economic system participants.
-Forced purchase of unwanted and unneeded products and services this includes unnatural needs created by industry and legislation. The artificial economy in contrast to the essential economy. Appearance products that appear to have more value than they do in reality.
-Money going to the public sector where due to a lack of accountability and controls all currency is devalued because the products and services created are not equal to the value created in the private sector causing a devaluation of currency, this is a big source of economic system leakage.
-Mismanagement or decisions made on guesswork.
-Encumbrances placed upon economic system participants increasing the cost of producing value.

Now there are a couple questions that need to be answered and some fictions to be eliminated by asking them.

There are 6.6 billion people on the planet not all of them have been given channels to make a contribution to the economic system. In theory the required weekly effort of each participant to sustain the essential economy, food, shelter, energy, transportation, infrastructure, education and if we want we can include entertainment and travel, is 16 hours thanks to efficiency created by technology. This requirement can be skewed though because of monopoly ownership of both material resources and property.

So why do so many have to work multiple jobs and more than 40 hours and so many have none? The system is flawed and mismanaged.


Another way to look at this is how valid is the assumption that that everyone should work a 40 hour work week? Did anyone calculate the daily needed value creation to support the essential economy? No it hasn’t been done. This is a flawed and erroneous assumption. If we were to force an arbitrary 40 hour work week then we would need to create the work to be done to sustain it perhaps through new infrastructure enhancements. Has anybody done this? No.

It is not about a lack or scarcity of money, this is limited only by ability to create value, and there is as much money as the people on the planet need to have. What create the limited supply is mismanagement, theft, fiction, and control of the symbol by a few.

The purpose and intent of a monetary system is to facilitate the exchange of value. In the economic system there are producers and consumers. Each adult economic system participant (ESP) is generally both a producer and a consumer. Monetary units representing tangible value or an intangible value can be used. In the current system fiat currency or monetary units having intangible value are used because a tangible currency based on a single precious metal would not be practical.

Generally a producer provides a single product or service to other ESPs while consuming a multitude of different products and services. The financial system serves to create a flexible symbolic representation of value so that the exchange of value can be liquid and easily proportioned since not all products and services are proportionate to each other. This also allows for transactions to occur between ESPs with only a casual quickly formed temporary relationship.

In our economic system there are producers and consumers and a third party that maintains the symbol used to represent value, the privately owned central banks. This third party controls the creation and distribution of symbolic units to the producers in the system. The creation of the symbolic units is the result of an accounting entry, money is created from nothing, out of thin air, and only a small portion printed as green backs. Generally the transaction that creates new money is a producer or group of producers going into debt. Which is to say based on a promise to create future value the producer is given units in the present representing some of the future value that they will create. There is a charge or fee for this monetary unit creation known as interest which must also be paid back in addition to the principle amount of the loan. If no new debt is created no new monetary units are created and preexisting monetary units would increase in value.

A natural economic system is simple in principle and requires only that it maintain and allocate units representing value in a balanced manner. With new monetary units created in proportion to the amount of goods and services produced by the producers in the economic body over time. The purpose of the financial system is to facilitate the balanced exchange of value between producers and consumers and in doing so creates a harmonious and prosperous economy. If it does not maintain a balanced exchange of value then it results in strife and conflict between the economic system participants.

Cash or currency can be thought of as the blood of the economic body and it must flow if the body is to function. Value is determined by the consumers in that they would be willing to labor or produce in exchange for receiving goods or services produced by another producer or group of producers.

So the economic system should be designed to properly manage the exchange of value between participants.

As we can see the current system has not done this and the primary reason is that the system infrastructure required to support an equitable system is not in place and would require foundational changes to information technology systems. For the first time in history we have the technology and means to implement an equitable balanced value exchange system.

Prior to now the systems have been managed based mostly on guess work and periodic artificial adjustments to correct errors that manifest as recessions and depressions. The systems also allow for corruption where some can extract wealth without creating genuine value for other economic system participants. These fluctuations would not exist in a balanced system designed based on economic science rather than economic quackery.

In a proper system the idea is that the producer requests the creation of new monetary units (loan) based on their future production of value for other economic system participants. One reason to do this is to allow the producer to obtain the tools or skills and or build the infrastructure necessary to produce value for other economic system participants. It is a benefit to ESP consumers to "loan" to a ESP producer so that the producer can be a productive participant in the economic system.

The role of the bank has been to determine the ability of the producer, or group of producers to generate the future value, and then to make sure that the producer does indeed generate that value. The bank does the risk analysis and creates and tracks the necessary transactions. The only problem is the banks do not have a scientific method to determine in actuality what value the producer can produce in the future because there are so many factors that are involved in the determination. They can only determine prior ability and performance in producing value and their current revenue stream. Value is determined first by needs and demand and these fluctuate over time, and are very dynamic. It may also be determined by want, but want generally covers things not essential. There are some needs that expire and their are new ones created. For example polluted water creates a need to purify water.


There are natural needs and fabricated needs. Those that do not expire and are not fabricated needs are known as the essential economy. These would be food, shelter, energy, physical injury repair, education, and transportation. On top of this we have the artificial economy which is based on wants or fabricated needs. For example the creation of a complex financial system creates the needs for accountants and financial analysts.

It is important to understand that money is created from nothing based on a promise to create future value. The financial system is supposed to support the accounting and analysis needed to manage and maintain a balanced exchange among the participants.

The current system is to slow and incomplete to keep up with the expansive market dynamics. It is not an economic science based system but rather one of quackery and fudge work with a modicum of reality taken into account leading to great disparity and imbalance.

I think it is time to make economics a science and base it on math and reality and provide the needed information infrastructure and systems to support it.

The second part above is New Economics 102

Aloha Patty, I appreciate that you took the time to read it would be nice if others cared about their future would take the time to read and understand.

The bailout didn't pass and it shouldn't have because the economic system participants about 90% said no.

We can fix the problem with a simple accounting entry erasing the incumbent wealth.

Why should they agree to give up a greater portion of the value they generate to cover the value that was stolen by those that own the system?

I am working on some viral video that will educate the many using easy to understand concepts showing the flaws not only in the financial systems, but which will also demonstrate how a few people on the planet and their cohorts (Government Representatives) take advantage of the trust and ignorance of the people to gain an artificial supremacy over others.

We should be reminded that people of Russia, Iraq and China are not at war with the people in the United Sates it's just a few men, minds clouded by illusion, using us all as pawns that are playing a lethal but not to them yet, game.

I think that if one can open up organized communications between the people of these countries one can unite all of us against the real enemies, the benefactors of the Ego Empire, in a Global Revolution.

Why should we borrow money so others can take a cut loaning it back to us?

Why should we borrow money so others can take a cut loaning it back to us?

Why should we borrow money so others can take a cut loaning it back to us?

Why should we borrow money so others can take a cut loaning it back to us?

Why should we borrow money so others can take a cut loaning it back to us?

Why should we borrow money so others can take a cut loaning it back to us?

Why should we borrow money so others can take a cut loaning it back to us?


Dear Heartphone,

In your Posting No. 3 you mentioned the "Atlantis Myth". You may possibly have read the book, "Atlantis, the Antediluvian World" by Ignatius Donnelly. This is a wonderful testimonial to the belief in Atlantis. Ignatius Donnelly was a friend of President Abraham Lincoln and had the approval of Lincoln to utilize the services of the U.S. navy to search for remnants of Atlantis. Ignatius Donnelly was to be funded monies for this study but, unfortunately Lincoln was killed before he could receive the funding.

It does appear that history repeats itself. Why can't we learn from our past?

Best Wishes,

"Betsy" S.

Hi Betsy,

I have only one answer to: Why can't we learn from our past?

It is simply because we don't allow ourselves to.

And if one asks oneself why not, then there are so many answers possible, as many as there are people.

Perhaps it is not possible in the end?

I do not know anymore. But the story Plato has left us really is a valid one in these times.

Plato suddenly stopped writing about Atlantis, so I guess perhaps he left it to future generations to fill in the missing details.

Just like the egyptian civilization did leave it to their next generation to fill in their details and so on :)

So each generation builds upon the other. I guess we just go forward and it will reveal itself by itself.

Dear Richard,

Good Luck with your viral video showing the easy to understand concepts showing the flaws not only in the financial systems, but also demonstrating how a few people on the planet and their cohorts (Government Representatives) take advantage of the trust and ignorance of the people to gain an artificial supremecy over others.

With your knowledge of financial matters and the larger global picture which is being regulated by
the minds clouded by illusion - You are especially well equipped to present the real picture and to dispel the darkness in many minds.

You are so right in saying that the people of Russia, Iraq and China are not at war with the people of the United States. It's just a few power-crazed men (minds clouded by illusion), who are using the people of the world as pawns in their lethal game.

It is definitely the Time for the Lifting of the Veil of Ignorance. It is Time for the Light to Dispel the Darkness.

Best Wishes,

"Betsy" S.

Hey Betsy, you should check out viralvideo.me

or click my name.

Not related to the video idea above but part of a future framework.

there is awareness.me as well

#6 ... very wise words, that I have only begun to live by. Thanks!

Dear Richard,

Thanks so much for referring me to viralvideo.me.

I clicked on: Mind Altering Orb and found the Crystal Orb Oracle Ark of the Covenant Altered State of Mind.

Wow!!! That was quite a trip. Can't help but wonder how you pulled that one off. I really needed the break from all the heavy "illusionary reality" being promoted these days.

You are really some kind of master magician, Richard. Keep on amazing us!

Best Wishes,

"Betsy" S.

Patty #7:

Thanks for your Qi reference. Fascinating healing waves! Recently I was searching for the definitions of radiant and reflected energy and ended up reading about a desert lizard and infrared.

Here are answers.com definitions that need to be read with right brain as well as left.

Infrared radiation
Electromagnetic radiation in which wavelengths lie in the range from about 1 micrometer to 1 millimeter. This radiation therefore has wavelengths just a little longer than those of visible light and cannot be seen with the unaided eye. The radiation was discovered in 1800 by William Herschel.

An infrared source can be described by the spectral distribution of power emitted by an ideal body (a blackbody curve). This distribution is characteristic of the temperature of the body. A real body is related to it by a radiation efficiency factor or emissivity which is the ratio at every wavelength of the emission of a real body to that of a blackbody under identical conditions. See also Emissivity.

Blackbody
An ideal energy radiator, which at any specified temperature emits in each part of the electromagnetic spectrum the maximum energy obtainable per unit time from any radiator due to its temperature alone. A blackbody also absorbs all the energy which falls upon it. The radiation properties of real radiators are limited by two extreme cases—a radiator which reflects all incident radiation, and a radiator which absorbs all incident radiation. Neither case is completely realized in nature. Carbon and soot are examples of radiators which, for practical purposes, absorb all radiation. Both appear black to the eye at room temperature, hence the name blackbody. Often a blackbody is also referred to as a total absorber. See also Heat radiation.

How do these energetics relate to our current events? Is the earth heating up because more humans are radiant radiators? Are systems crashing because more light is filtering through and what once fit no longer does so? Are we evolving in Qi as we watch an empire collapse?

Trish~~

Dear Richard,

Today I visited your God Particle.net and read about "Intangics" replacing the current "Particle Physics".

It's a fascinating read and I believe that this is where we are headed.

The Tangible does surely come from the Intangible.

Thanks so much for the comprehensive presentation.

Best Wishes,

"Betsy" S.

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