Yet even here the above numbers pale when we look at the shadow banking system (aka the 'dark markets'), in particular the so-called 'over-the-counter' derivatives market. These hair-trigger dirty bombs of the system are less an accident and more a catastrophe waiting to happen, and the GFC merely gave us a taster of what's to come if they aren't properly regulated. They include the notorious Credit Default Swaps (CDS) and Collateralised Debt Obligations (CDOs) that were at the heart of the GFC.
It is at this point we have to conceptualize amounts of money that almost call for the use of scientific notation to represent numerically. Whilst estimates vary as to how much 'money' floats around the dark markets, the quantity by some accounts is truly, truly staggering: Anywhere between US700 trillion to 1.5 quadrillion dollars, the upper amount roughly 100 times the size or value of the US economy (GDP), or again roughly 50 times the value of the global economy! Yet no-one really knows, presumably because no-one can count that high!
Another Crisis (In the Heartland)
In his post-mortem of the GFC, "Crisis in the Heartland -- Consequences of the New Wall Street System", Peter Gowan gets to the heart of the matter in a way that it seems few do or have done since the meltdown. Gowan proposes nothing less than a program for an alternative public-utility credit system, and an international financial and monetary system under national-multilateral co-operative control, both propositions that would have the long-since departed Jekyll Island conspiratorial cabal that concocted the Federal Reserve System in 1913 spinning furiously in their mausoleums.
Moreover, after noting that the structure and dynamics of Wall Street began changing dramatically from the mid-1980s onwards, Gowan then identified the main features of what he calls the "New Wall Street System", which themselves proved to be, individually and collectively, major catalysts for the onset of the Crash. These included (the):
- rise of the lender-trader model;
- speculative arbitrage and asset-price bubble-blowing;
- drive for maximizing leverage and balance-sheet expansion;
- rise of the shadow banking system and associated 'financial innovations';
- salience of the money markets & their transformation into funders of speculative (bubble) trading; and
- new centrality of credit derivatives.
Gowan says these changes mutually re-enforced each other, forming an "integrated and complex whole, which then disintegrated in the course of 2008." He explains each of these features in turn, and in doing so we get some idea of how out of control, top-heavy and unstable the new "System" had become. As a case in point, contrary to popular belief the so-called housing bubble was not the sole or main cause of the resulting credit crunch after it burst. The property bubble was more of a symptom of the underlying fault lines in the new system; in any event, as Gowan states clearly, after noting the ample evidence the Wall Street banks "quite deliberately" planned the house-price bubble, they then,
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