Why isn't the press discussing this?

Question

Aside from the mortage crisis...the real reason Bear Stearns was bailed out...the derivatives market. Who knows what other kind of deals have been set up and they're not telling us about. Isn't this really what we should be looking after? (Note: BS had around 15 trillion in derivative contracts...thats why everyone was worried about the domino effect.)

Answer 1

Derivatives can be analogized to integrated circuits in modern electronics--very important but technically difficult to understand.  Also, derivatives are traded in institutional markets that are quite opaque to the general public.  Moreover, government officials don't keep very good track of what's going on in the derivatives market, so the government doesn't provide meaningful guidance to the press.

Answer 2

The derivatives market is the big elephant in the room. The BIS just said that the total of 1 Quadrillion dollars (is this how we write it) in nominal value. Compare that the world gross product of $70 trillion. The world is essentially leveraged at a rate of 1 to 14.

A big chunk of this derivatives is OTC (that is illiquid and with high conterparty risk). A 15% writedown of this market would wipe out the world's yearly production. I think this is why Buffet said these are Financial WMDs (they could destroy the world several times just like the atomic bombs)