Tuesday, May 26, 2015

Increased Share of Derivatives - An insight into US crisis

Derivatives became a popular instrument by 1986-87. Derivatives do not represent any real wealth.

Steadily investments in these derivatives went on increasing. Derivative total turnover was 1 billion $ or so in 1977.

Steadily there was huge investment in these derivatives. At the peak of economic crisis in US in 2007, the investment was to the tune of 3.7 trillion $ a day. Total unsettled derivatives at the peak crisis were to the tune of 596 trillion $.

The actual transactions represented by these derivatives were only 15 trillion $.

These derivatives represented no real wealth, no real worth, no real income, no real wages.

 These were main reason of sudden collapse of US financial market.

(Taken from speech of Shri Gurumurthy)

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