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Originally Posted by SeeGeeWhy
One surprising thing to me was the rapid growth of derivatives - nearly $0 before 1980, and just under $600 trillion in 2007, which is nearly 10x the global GDP (the output of the entire planet each year).
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There were articles in The Economist years ago talking about this, and how the derivatives system is basically totally unregulated.
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Simmons has some poignant commentary on how the halt of the credit system is artificially deflating oil prices as large hedge funds are no longer able to borrow large sums of money to drive up futures contracts.
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This is only half true. The stoppage of short selling hit the hedge funds hard, as they SS to make gains during down times. Because of their leveraged exposure, the only way they could make margin was to sell their assets at lower than market value.
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If the credit markets recover, oil price will not be far behind...
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Maybe. Depends on how much regulation the derivatives market will get.