Revelations 18:23:’For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’
Important Takeaways:
- ‘Huge, Missing and Growing:’ $65 Trillion in Dollar Debt Sparks Concern
- There’s a hidden risk to the global financial system embedded in the $65 trillion of dollar debt being held by non-US institutions via currency derivatives, according to the Bank for International Settlements.
- In particular, they raised concern with the fact that the debt is going unrecorded on balance sheets because of accounting conventions on how to track derivative positions.
- To understand how the system works, consider a Dutch pension fund buying assets in the US. As part of the transaction, it will often use a foreign-currency swap to exchange euros for dollars. Then, when it’s closed out, the fund will repay dollars and receives euros. For the length of the trade, the payment obligation is recorded off-balance sheet, which the BIS calls a “blind spot” in the financial system.
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