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The homepage was last updated October 2022.

The $100 Trillion World Economy In One Chart : (US Dollar)

A country’s Gross Domestic Product (GDP) is a general gauge of its economic health. It calculates the entire monetary value of products and services generated in the private and public sectors over a specific period of time. This chart presents the $100 trillion global economy, all in one chart. (Visualcapitalist.com).

The world's ever-growing and unserviceable debt has now (Sept./2022) grown to a staggering 304 trillion US dollars, that is, more than 3 times the world's combined gross domestic product. (GDP).

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Debt crisis: Which countries are at risk of defaulting ?

Lebanon, Sri Lanka, Russia, Suriname and Zambia are already in default, Belarus is on the brink and at least another dozen are in the danger zone as rising borrowing costs, inflation and debt all stoke fears of economic collapse. These countries are Argnetina, Ukraine, Tunisia, Ghana, Egypt, Kenya, Ethiopia, El Salvador, Pakistan, Equador, Nigeria. (Reuters, July 2022).

 

The financial derivatives market, "financial instruments" is now an incredible 1000 trillion dollars, which is more than 10 times that of the total world gross domestic product (GDP).

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Derivatives are financial contracts that derive their value from an underlying asset. These could be stocks, indices, commodities, currencies, exchange rates, or the rate of interest. These financial instruments help you make profits by betting on the future value of the underlying asset.
Derivatives can be used to hedge price risk as well as for speculative trading to make profits. The four major types of derivative contracts are options, forwards, futures and swaps. (Sept. 2022).

 

 

"The Derivatives Time Bomb" refers to a situation where the securities you bought have dropped drastically in value.

In the derivatives market, there will be demands for additional security for the increased risk exposure held by investment banks, financial institutions and investors. They now sit on huge derivative portfolios. Typically, this will involve a requirement of 5-10 % additional security to avoid default, so-called "margin calls". Whitch means that these institutions must "cough up" between 50-100 trillion dollars in a very short time. None of these are able to provide such amounts to day. If you fail to pay the margin call, the broker has the right to begin liquidating your assets. (Sept. 2022).

Bank of England Had to Rescue U.K. Bond Markets (Date: September 28, 2022).

The Bank of England (BOE) took emergency action on September 28, to avoid a meltdown in the UK pensions sector, unleashing a £65 billion spread over 13 days in a bond-buying programme to achieve UK financial stability. The country’s pension funds, many of which are big holders of derivative contracts tied to interest-rate moves. The Bank’s intervention will help buy time for the pensions funds to unwind their derivatives positions.

The value of those derivatives, which include things like interest-rate swaps, have plunged alongside bond prices. But because the contracts require investors to post additional collateral as rates move, the losses for pensions have been amplified. Estimates says that U.K. pension funds have received margin calls for at least £1 billion since Friday’s budget announcement. Roughly two-thirds of the pension plans have been affected.

Pension funds have been forced to sell assets to post collateral with the funds that manage their exposure to rate moves, known as liability-driven investment funds, or LDIs. Roughly £1.5 trillion in assets were held in LDIs in 2020, according to trade body the Investment Association.
Typically, pension funds have several days to come up with cash once their LDI manager asks for collateral. Now, pension managers are being given hours.

Interest rates on government debt fell after the Bank intervened, with the 30-year bond rate moving from above 5% to below 4%.