You could be forgiven for thinking that financial bloggers are hysterical and fantasy-ridden, far more so than the middlebrow newspapers that have only just caught on to the crisis.
Until you learn the facts.
The money system is so enormous and complex that nobody knows all the details, but
it is estimated that in 2007, the entire world's GDP was equivalent to $54.35 trillion.
Derivatives - mutual insurance
without the requirement on anybody to hold any assets - have
recently been estimated by the Bank for International Settlements at over $1,000 trillion.
To put it visually (figures are in trillions of dollars):
And now a quotation on default rates - the percentage of bonds (promises to repay) that fail:
NEW YORK, Aug 1 (Reuters) - The U.S. junk bond default rate rose to 2.25 percent in July from 1.92 percent in June, as a credit crisis and sluggish economy pushed more companies into bankruptcy protection, according to data from Standard & Poor's released on Friday.
The default rate is likely to rise to 4.9 percent over the next year and could reach 8.5 percent if economic conditions are worse than expected, S&P said in its report.
Note that in the case of derivatives contracts, a default rate of less than 5.5% would equate to a wipeout of a whole year of the entire world's earnings.
No wonder that governments are absolutely determined that confidence in the system must be maintained, at whatever cost. It may take a long time to blow up a balloon, but it doesn't burst slowly.
And how do we get out of this threatening situation? How on earth, to use a different analogy, will the cat ever climb back down from so high a tree?