2008 world GDP $60 trillion, derivatives exposure $560 trillion

A while back I posted about current growing gap in how much wealth the world produces to how much debt it accumulates.  Basically it was about how force institutions trading complex derivatives to hold more capital, mirroring U.S. plans to curb risk in the $560 trillion market blamed for deepening the global recession.

So how does $560 trillion compare to the entire world’s economy?

The anwer found over at the  World Bank’s site and downloading a pdf which I’ve posted a portion of and the link to see for yourself.

According to the World Bank, for the year 2008 the answer is $60 trillion dollars. Take a second to absorb that. The risk fraught derivatives market is greater than nine times the entire world’s production in 2008.

Here is the link to information http://siteresources.worldbank.org/D…ources/GDP.pdf

and also a snip of information from the World Bank report,

Gross domestic product 2008

Ranking Economy – millions of US dollars
1 United States 14,204,322
2 Japan 4,909,272
3 China 3,860,039
4 Germany 3,652,824
5 France 2,853,062a
6 United Kingdom 2,645,593
7 Italy 2,293,008
8 Brazil 1,612,539
9 Russian Federation 1,607,816
10 Spain 1,604,174
11 Canada 1,400,091
12 India 1,217,490
13 Mexico 1,085,951
14 Australia 1,015,217
15 Korea, Rep. 929,121
16 Netherlands 860,336
17 Turkey 794,228
18 Poland 526,966
19 Indonesia 514,389
20 Belgium 497,586

World 60,115,459
Low income 568,772
Middle income 16,358,009
Lower middle income 7,908,868
Upper middle income 8,445,380
Low & middle income 16,937,848
East Asia & Pacific 5,186,610
Europe & Central Asia 3,860,600
Latin America & Caribbean 4,247,077
Middle East & North Africa 1,117,198
South Asia 1,531,499
Sub-Saharan Africa 987,120
High income 43,189,942
Euro area 13,565,479

Darling Said to Tell U.K. Corporate Banks to Plan How to Unwind

By Gonzalo Vina
http://www.bloomberg.com/apps/news?p…d=alEB.Ie2t3RA

July 7 (Bloomberg) — Chancellor of the Exchequer Alistair Darling will call on British banks to plan for their own demise by drawing up plans to unwind their businesses in case they fail, a person familiar with the plan said.

The demand is part of a Treasury proposal for legislation tightening regulation of financial services. Darling will make a statement to Parliament about the measures tomorrow at 12:30 p.m. London time.

The rules are aimed at preventing a repeat of turmoil in financial markets that forced Britain to rescue Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc last year. Prime Minister Gordon Brown’s government is coordinating the overhaul with President Barack Obama’s administration in the U.S.

“What we have now is not sufficient and having a resolution mechanism in place would make a tremendous difference,” said Viral Acharya, professor of finance at Stern School of Business in New York. “Governments now have to make sure they can wind down business banks in a smooth manner.”

Darling will redraw British rules to force bondholders to share losses with equity owners during bankruptcy and take steps to disclose trades of complex derivatives and savings, the person said.

Turner’s Proposal

The Treasury is adopting all the recommendations made in March by Financial Services Authority Chairman Adair Turner, who called for a “revolution” in the way the industry is governed. He suggested banks hold more capital and hedge funds to be more open with regulators. He wants first time buyer mortgage loans not to exceed the value of the property they are secured against.

Parliament will start work on drafting laws to implement Darling’s plan after its summer recess ends in October. The Treasury will issue a draft of proposed legislation tomorrow.

The chancellor also is planning to ask banks to protect deposit-taking operations from more risky trading businesses, requiring instructions including HSBC Holdings Plc and Barclays Plc to ring-fence investments banking units, people familiar with the plan said on June 24.

Treasury Minister Paul Myners on June 18 said the U.K. will also force institutions trading complex derivatives to hold more capital, mirroring U.S. plans to curb risk in the $560 trillion market blamed for deepening the global recession.

Those proposals already have attracted criticism. The British Bankers’ Association has said the plan to reorganize units to lower risk may lead some lenders to relocate abroad.

Embryonic Proposals

At a less-developed stage will be proposals to beef up the role of the FSA and the Bank of England, which will be given new authority to police banks and assess risks to the stability of the economy from asset-price bubbles.

Tomorrow’s plan also won’t tackle the issue of executive pay, identified by Darling and Brown as sources of instability in financial markets. Instead Darling will wait until later this month for a report on the issue by David Walker, a senior adviser at Morgan Stanley, before recommending steps.

The worst financial crisis since World War II has forced the British government to extend more than 40 billion pounds ($65 billion) of aid to banks and take on at least 1.4 trillion pounds of liabilities, more than the value of the economy.

While plans exist at national, regional and global levels for greater oversight, there is disagreement on who will do it and what tools they will use.

‘Too Big to Fail’

The government is seeking to find ways of coping with institutions deemed “too big to fail,” something Bank of England Governor Mervyn King said last month needed to be addressed to limit risks to taxpayers. He suggested that banks should be required to write “a will” describing how administrators could unwind their assets.

“Making a will should be as much a part of good housekeeping for banks as it is for the rest of us,” King said on June 17. “And it would be sensible for the various authorities to work across national boundaries to identify detailed plans for how each large cross-border financial institution could be wound down.”

As part of the effort, the government wants all investors financing banks — whether through companies, equity or bonds — to share in any losses when an institution is rescued. Shareholders suffered the biggest losses when the government took control of Lloyds and RBS, and the Treasury wants greater discipline elsewhere in markets.

The person said British plans will be go no further than those outlined in the U.S. by Obama.

British officials are pushing for a common approach with American and European regulators that would centralize the settlement of derivative trades through a web of clearinghouses.