We may be dealing with over a QUADRILLION "dollars of 'gains and losses'" most of which are "created from thin air, embedded in 'derivative' instruments whose value will rise and fall over the term of the underlying assets."

Dear Friends, according to various distinguished sources including the Bank for International Settlements (BIS) in Basel, Switzerland -- the central bankers' bank -- the amount of outstanding derivatives worldwide as of December 2007 crossed USD 1.144 Quadrillion, ie, USD 1,144 Trillion.

The main categories of the USD 1.144 Quadrillion derivatives market were the following:

1. Listed credit derivatives stood at USD 548 trillion;
2. The Over-The-Counter (OTC) derivatives stood in notional or face value at USD 596 trillion and included:

a. Interest Rate Derivatives at about USD 393+ trillion;
b. Credit Default Swaps at about USD 58+ trillion;
c. Foreign Exchange Derivatives at about USD 56+ trillion;
d. Commodity Derivatives at about USD 9 trillion;
e. Equity Linked Derivatives at about USD 8.5 trillion; and
f. Unallocated Derivatives at about USD 71+ trillion.

Quadrillion? That is a number only super computing engineers and astronomers used to use, not economists and bankers! For example, the North star is "just" a couple of quadrillion miles away, ie, a few thousand trillion miles. The new "Roadrunner" supercomputer built by IBM for the US Department of Energy's Los Alamos National Laboratory has achieved a peak performance of 1.026 Peta Flop per second -- becoming the first supercomputer ever to reach this milestone. One Quadrillion Floating Point Operations (Flops) per second is 1 Peta Flop/s, ie, 1,000 Trillion Flops per second. It is estimated that all the data found on all the websites and stored on computers across the world totals more than One Exa byte of memory, ie, 1,000 Quadrillion bytes of data.

Since that post he has corrected the cumilitive number.

Now they are around 1.4 Quadrillion.

And then there is this:

Dear Friends, over the last few days, the US Federal Reserve has opened USD 120 billion (30 x 4) of new swap lines of credit for another quartet of central banks: Mexico, Brazil, South Korea and Singapore.

This brings the number of such lines to 14. Similar credit lines have been issued to the central banks of Australia, New Zealand, Switzerland, Denmark, Sweden, Norway and other members of the G7, of which three -- Germany, France and Italy -- are within the Euro. Ten of the swap lines now amount to USD 255 billion, while those with the European Central Bank, the Bank of England, the Bank of Japan and the Swiss National Bank are technically unlimited. Global credit markets froze up in late September after the failure of investment bank Lehman Brothers, limiting private sources of dollar funding. The US Fed move comes as central banks worldwide continue to fight systemic weakness in credit and capital markets. Such weakness has undermined economic prospects and led many to fear a long and protracted global recession.

Just so you know what your money is flowing towards supporting:

In an article on FinancialSense.com on September 9, Daniel Amerman maintains that the government's takeover of Fannie Mae and Freddie Mac was not actually a bailout of the mortgage giants.  It was a bailout of the financial derivatives industry, which was faced with a $1.4 trillion "event of default" that could have bankrupted Wall Street and much of the rest of the financial world.  To explain the enormous risk involved, Amerman posits a scenario in which the mortgage giants are not bailed out by the government.  When they default on the $5 trillion in bonds and mortgage-backed securities they own or guarantee, settlements are immediately triggered on $1.4 trillion in credit default swaps entered into by major financial firms, which have promised to make good on Fannie/Freddie defaulted bonds in return for very lucrative fee income and multi-million dollar bonuses.  The value of the vulnerable bonds plummets by 70%, causing $1 trillion (70% of $1.4 trillion) to be due to the "protection buyers."  This is more money, however, than the already-strapped financial institutions have to spare.  The CDS sellers are highly leveraged themselves, which means they depend on huge day-to-day lines of credit just to stay afloat.  When their creditors see the trillion dollar hit coming, they pull their financing, leaving the strapped institutions with massive portfolios of illiquid assets.  The dreaded cascade of cross-defaults begins, until nearly every major investment bank and commercial bank is unable to meet its obligations.  This triggers another massive round of CDS events, going to $10 trillion, then $20 trillion.  The financial centers become insolvent, the markets have to be shut down, and when they open months later, the stock market has been crushed.  The federal government and the financiers pulling its strings naturally feel compelled to step in to prevent such a disaster, even though this rewards the profligate speculators at the expense of the Fannie/Freddie shareholders who will get wiped out.  Amerman concludes:

"[I]t's the best game in town. Take a huge amount of risk, be paid exceedingly well for it and if you screw up -- you have absolute proof that the government will come in and bail you out at the expense of the rest of the population (who did not share in your profits in the first place)."4

with legalese? I may need another pot of coffe before trying to plow through something like that... lol