The chart below (source) shows all of the world’s money and financial markets in one visualisation. Each square represents $100 billion.
As you scroll down note how large global debt is (both public and private) in relation to the total amount of money in the system.
The real eye opener is when you reach the last category – derivatives. A derivative is a contract between two or more parties that derives its value from the performance of an underlying asset, index or entity. For example future options on a commodity such as oil derive their value from the price of oil but can be traded for any price in the market as buyers and sellers speculate about the future price of oil. What has happened over the last few decades as financialisation has accelerated is that the global trade in derivatives has grown enormously so it is now much vaster than the underlying ‘real’ values that it is based on. This infographic neatly shows this out of kilter growth. The problem is because there is a vast amount of derivatives sitting on top of various markets then any market shifts can be hugely amplified via the derivative mountains. This builds instability into the global system and it was the implosion of a series of derivative markets that was a major component and cause of the 2008 global financial crisis. Unfortunately since then the mountain of derivatives has continued to grow. Its like endlessly adding more and more cargo to a ship with a fixed amount of ballast, at some point it gets top heavy and capsizes,
