$1,000,000,000,000,000

That number, folks, is a quadrillion. A million billion. Bet you've never seen it before. I've only seen it in measuring distances in astronomy; the nearest star to the sun is about a quadrillion meters away from here. It seems like such an unfathomably large number that I wouldn't expect to ever encounter it associated with something here on Earth, something directly related to the human experience. But I saw it today.

You'll notice the number in the title has a dollars sign in front of it. That number represents the approximate amount of financial value tied up the derivatives market as recently reported by the Bank for International Settlements. Over fifteen times the entire world's GDP ($60 trillion). In other words, way more money is invested in these derivatives, which are best described in layman's terms as bets on bets, than actually exists.

Confused? Good. You're starting to get why we're in such a mess. See, the fact that these volatile markets hold a quadrillion dollars of value is not a dangerous thing in itself. The problem lies in the harsh reality that nobody has any f***ing clue what these things are worth. That's why everyone's so scared.

This can happen because there are no intrinsic checks and balances (aka regulations) on the derivatives market the way there are with banks. Institutional investors and speculators can leverage their real assets without limit, essentially creating vast amounts of financial wealth out of thin air. But because that wealth isn't backed up by any material assets, its value is both limitless and extremely unstable.

To better put this phenomenon into perspective, take a look at this chart:

More to come....