Millions Have Been Thrilled, Millions Are Waiting To Be Thrilled – And You’ll Know Why There Can Never Be Another…

60 Minutes took a look last night at the “shadow banking system” focusing on a particularly nasty financial device called Credit Default Swaps . If you missed the program you can read the transcript here.

There has been much focus on Mortgage Backed Securities and what they mean to the current global financial crisis. But MBS’s are just the tip of the iceberg.

The estimate total value of Credit Default Swaps in circulation is $60 trillion. Try and wrap your head around that number - $60 Trillion, it looks like this:

$60,000,000,000

To put that in some perspective consider the following: according to our very own CIA the total Gross World Product, the total of all goods and services produced in the entire world in 2007 was estimated at $65.61 trillion.

Credit Default Swaps are nothing more than insurance, a wolf in sheep’s clothing. If these devices were called "credit default insurance" they would be subject to federal regulation.  Just like any other insurance the issuers would be subject to capital requirements but by calling them “swaps” they avoided the inconvenient requirements that would have limited their ability to create the incredible pyramid scheme that they did.

No one knows where this all goes. In the face of this, the notion that $700 billion is going to cure the global credit crisis is ridiculous. Credit markets are frozen. Banks will not lend to other banks and much, much more will need to be done probably much sooner than later. $700 billion was just enough to take care of some of the liabilities. The entire system needs to be recapitalized. This will undoubtedly lead further nationalization, at least for several years.

That sucking sound you heared was trillions of dollars of worth being drawn up through the system, from you and me, straight out of the systme with a sizeable part of it into the pockets of Wall Street’s best and brightest - $38 billion in bonuses in 2007 alone.

Maybe, just maybe the Inauguration Parade on January 20, 2009 will be different and the people will hunt this fiendish monster down. Let’s hope so.