Visualizing the size of the banking crisis

Sizing the issue at hand seems to be the first problem. Banks keep the so called derivatives off their balance sheets (because when looking at it with a sense of black humor these instruments are a bit like the banks’ own print run of casino chips – As long as others exchange them freely for real money that’s what they are worth. When that situation changes their value changes too – well, worst case to nothing or – better said, whatever someone is willing to pay for the illusion of value)

So some indications for the situation:

  • Investment bank Goldman Sachs currently expects the total loss for the finance industry to be more than 1.1 Trillion dollar (EUR705 billion). But its most unlikely that this number reflects reality. We have learned that lesson from the Japanese Banking crisis (on a much smaller scale) where early figures had to be adjusted massively some by the factor 100 and more.
  • The European Central bank for example that in average over the last years has injected about 80 billion EUR p.a. unscheduled into financial markets had to inject more than 1,300 billion EUR in 2007 alone and until March 2008 has already pumped in another 420 billions EUR.

The Bank for International Settlement estimates that the worldwide exposure in derivatives is about 516 Trillion USD. The Boston Globe reports similar numbers (above 500 Trillion USD) in a long article on the economy earlier this year citing one of the leading experts in that field of business.

Numbers we have been told are even higher and we have created the drawings below based on the assumption that the worldwide exposure in derivatives is around 581 Trillion USD. (If you believe the number is lower shape off some pixel from the drawings, it does not matter as we are staying in the same scale)

While certainly not all of that sum is a write-off a few things are worth mentioning here:
Assuming a 5% premium, that alone adds-up to about 2.9 trillion of value that has already been siphoned off beforehand. Well that’s of course if each instrument would have only be traded once.

But I believe now you’re getting the name of the game – the bigger the pot – the more often you turn it around – the more you make (as a casino bank of course).

At every step in that game the banks and other financial institutions have exchanged this artificial cash against real cash of their customers. As long as you don’t hold the artificial cash when the finishing bell rings one could believe you’re making a huge profit. Snowball systems or chain letters work not very different from that.

But there is always someone who has to pay up…Some experts say it will be the majority of citizens that will have their assets devaluated and by that will cover the bill for the banks. We believe the best approach to find out is again looking over to Japan that has seen its economy in stagnation for more than 10 years following their banking crisis and scandals.

Anyway this post is not about tulip trades, bank robberies, swindlers or how banks have betrayed the trust of their customers for the personal profits of some of their employees – its about visualizing the size of the problem.

1. Stacking up a pile of dollars

So how much is 581,000,000,000,000 in physical terms – lets say as a stack of dollar notes:

(Crunchweb has done something similar for the cost of the Iraq war but those numbers are of course dwarfed here )

One dollar is roughly 6 inches long, and 2½ inches wide and as thick as a regular piece of paper. When you stack up 10 Million dollars in one dollar notes you get a block roughly the size of a car and as tall as an average person. A single stack of 10 Million dollar bills would already be more than 1000 m high.

image one Billion dollar pile A pile of one Billion dollars is already almost 8m tall, about 17m long and 10.5m wide. A single stack of this amount would be higher than 110km or more than 67 miles.

continue reading the story after the jump

image 320 Billion dollar pile Our next drawing shows a pile of 320 Billion dollars. It has now grown to about 41m width, 66m depth and more than 150m height. As a single stack it would already be more than 20,000 miles high. (The black spots bottom left are the car / person for comparison)

The next drawing puts the 581 Trillion into scale.
Click on the image below for a larger scale version

link to larger scale image To be able to display the stack of dollar bills in a normal size drawing we have created 181 stacks each about 1,500m tall. One of them easily dwarfs the Empire state building (450m) and even more (forgive us – we could not refrain from this example) the (former) Bear Stearns building (230m) in N.Y.

The size of the car in this drawing has now shrunk below one pixel. As a single stack this amount would be 63,910,000 km high roughly 166 times the distance from Earth to the Moon or about 70% of the distance to Mars (when its closest to Earth).

2. Measuring by countries

Currently the global GDP – the total value of all goods and services produced worldwide within one year – is about 90 Trillions dollar. One could say that the whole planet will have to work the next 6.5 years to make up for this disaster (excluding interest).

In country terms this adds up as following:

  • USA – about 45 years of GDP (excluding interest)
  • UK – about 290 years of GDP (excluding interest)
  • Germany – about 190 years of GDP (excluding interest)
  • France – about 290 years of GDP (excluding interest)
  • Japan – about 140 years of GDP (excluding interest)
  • Australia – about 760 years of GDP (excluding interest)

I guess the numbers and the sheer size of the problem speak for themselves. This is definitely one of the biggest mess-ups in the history of mankind.

Note: We have not calculated if there would be enough trees on our planet to print all that money – most likely not or not many trees left after that.

Related Posts:

  1. Data-visualization: Charting The Banking Crisis
  2. link to article
    The web log “And Still I Persist” has made two interesting implementations available that demonstrate how data-visualization tools similar to “Gapminder’s Trendalyzer” can be used to show patterns in vast amounts of data.

    They used OSG’s Boomerang technology to show changes in banks’ mortgage portfolios based on the data the banks have reported to the FDIC. The first chart / animation shows the amounts of 90+ days late mortgages and the second one visualizes the changed amounts in mortgages that…

    continue reading…

  3. Drawing: Family Tree
  4. link to article
    A drawing of a family tree taken literally in a different way – beautiful drawing – you have to see it at full scale for the details. (link below)

    continue reading…

Comments Off

Comments are closed.