SOS Derivatives Uncovered?

The world derivatives is about USD800 trillion, US has about say USD350 trillion. The IOUs derivatives created is easily exceed USD100 trillion and the real worth is less than USD20 trillion. There is about say USD80 trillion to be written off the book. So, how much more can the FED buy up the toxic IOUs?

Chances are high that all these Derivatives IOUs will hit the banks book, one way or another, sooner or later.

If reviving a sick economy by buying up toxic IOUs, then US has no problem at all. Just replace all these toxic IOUs. Can the QEII so simple, just replace it and consumer confidence will comes back? Well, then, how do we explain the

• high unemployment rate of 9.6 to 10%
• unsold housing stock of up to 2 million units
• contracting bank credit
• foreclosure mess

MyView

When a country allows the country to have easy money, it is inevitable that some sector is inflated, in this case, the US housing and commercial real estate is INFLATED, not only by the conventional mortgage loans, but also the SYNTHETIC loans which is about say 5-10 times larger than the conventional loans.

The synthetic loans is non other than CDOs, MGS, CLOs, CDS, etc, say if the housing industry is USD20 trillion, the derivatives will be say USD100 trillion.

For the economy to function again, all the toxic synthetic and non performing conventional loan need to be written off the books from the banks, until then, it will be like another JAPAN, only this is 10 worst, because, after major DEFLATION on all assets class, US will likely hit by high inflation.