| From the Desk of Don Yocham: The equity value represented by all stocks traded around the world adds up to about $90 trillion.
Tally up global bonds and you get another $250 trillion in value.
Quadruple that debt number and you approach the value all derivatives - $1 quadrillion.
But none of this is real. At least not in a physical sense.
You don't bump into a stock when walking down the street. You don't eat a bond to survive. Rocket scientists don't have to account for the weight of a derivative when sending a rocket into orbit.
Financial instruments are ideas. We may represent those ideas by a piece of paper or database entry. But representing an idea on paper doesn't endow it with material existence any more than me writing "I love you" on a note to my wife.
Stocks represent the idea of equity in a corporation. Debt represents money owed. Derivatives are ideas piled onto those ideas. The idea of stock, bonds and derivatives rely on laws put down by government. And everything in this paragraph – including corporations and governments – are just ideas too.
Turtles all the way down.
We may exist in a world seemingly dominated by physical objects and hard constraints. But wealth and power in today's world comes almost exclusively from commanding ideas.
Indeed, ideas rule the world.
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