Investigating The Next Black Swan

I have been looking into the assumed next Black swan. And I’m not sure how to calculate it. Because the last one was when we were bailed out and that was roughly 700 billion for the bailout. Ok that had a move of 1500-3000 pips dependent on what pair you looked at and what TF. We are now looking at the 1.4 quadrillion dollar (that’s 1400 trillion) derivatives scam. The big problem there is that the world only has about 500 trillion dollars (that’s all the money that exists). And most of our publicly traded companies use these derivatives for their books. They are allowed to for now but these derivatives are nothing. They are worthless. And we are talking about 1.4 quadrillion (1.4qquadrillion does not even exist) of stated worth that when cashed in is actually worthless. Or maybe just worth initial deposit. Now when or if that gives loose how big will the black swan be?
And even more important where will it hit the hardest?
If 700 billion moved things 1500-3000
What will 140000 billion move things.

All derivatives aren't worthless. Some even become incredibly valuable, just ask John Paulson ( the hedge fund manager, not the former treasury secretary)

I know not all are. But how do you account for 1.4 quadrillion when that amount doesn’t even exist on earth

I understand what you are saying, but if you have a contract to buy euros in January and I have one to buy the euro in July, we could end up buying the same currency, but its notional value will get counted twice. Sometimes, the "notional amount" is just a benchmark that never even changes hands—as in the case of the interest-rate swap, the most common type of derivative. Because derivatives are often used to hedge risks, there's a good chance that many contracts in the system will cancel one another out.

Just like any market, derivatives experienced a bubble, and with some of the investment banking firms going under and other large players, it helped to deflate it. They are not going away by any stretch of the imagination. They can be extremely beneficial in some cases.

There is also major steps being taken to be able to list the contracts on an exchange, such as the CME in partnership with Citadel, as well as the Intercontinental Exchange (ICE) with Goldman and others.

The CME has already cleared over One quadrillion (notional value) in contracts.

I think a main concern is not notional value but that markets that are not liquid, (i.e, housing). Since no one can exit when prices are falling, that market locks up along with contingent businesses, unlike stocks or commodities or FX, where liquidity keeps markets from freezing up. The market can still fall, but you can transfer some of that risk buy hedging.

Excellent point about liquidity. The other point to be brought up is that the figure 1400 trillion is at least double counted, since there are at least two counter parties to every contract.

Yes, thank you.

ok I have a question about housing. Now housing is fallings in price and essentially creating margin calls that can’t be pulled out of. here is some of my thinking

1 nobody will pay the inflated price and we owe that inflated price to the banks.
2 the loans of yesteryear are not going to be happening any longer. (At least like they were) banks don’t like fanny and Freddy (who could blame them)
3 the stock market has lost about 50% but housing prices have only dropped 20 on average. (housing is too expensive for normal people to buy) and its price is not matching with the market.
4 we average more than 500,000 job losses per month (driving up foreclosures) as people lose their income.
5 and now our governments have gone to FX war. (playing lets devalue our currency faster than the other countries.
The big problem I can see on the horizon is locking up the liquidity on these other markets like forex. And catching the derivatives market with its pants down.

Now with all these factors do you think that our market is immune to these effects.

you do have some good points privacy.

Because of the massive liquidity in the FX market and Bond market ( bond market affects flow of capital), even if the liquidity slowed down some you'd still be able to buy and sell. What you want to determine is which currency will benefit from the change in flow of capital.

Markets go up, markets go down. Always have and always will. The question isn't whether or not a particular market will be affected. All markets get affected to one extent or another. Its the flow of capital that you need to be aware of. When times were good for the carry trade, a multitude of HF's and traders and some governments to some extent where all involved in the carry trade. When every one ran for the exits during the credit collapse, the liquidity in the FX market didn't come to a stand still, it shifted into things US treasuries and USD. China currently holds a little over $700 billion in US treasuries. People are afraid of they'll dump them, while just the opposite has happened, they are still buying because the Yuan is pegged to the USD, they're tied to the US. Right now we are in a treasury bubble, and when that starts to deflate, look for capital to shift to a different asset class, whether its out of USD ( which could benefit the Euro) or Oil, or commodities.

For the housing market, the excess liquidity has to be absorbed before much improvement will be seen. That's supply and demand, but slow to sort itself out becuause of the liquidity issues. We are lucky, that in the FX market, we are dealing with the most liquid market in the world. If one country is experiencing difficulty, capital will leave it and go find a better return elsewhere benefiting that new locations currency.

A bit of a ramble!