What could be the most mindblowing statistic in the history of mindblowing statistics appeared in last week’s New Yorker, of all places. I was so convinced that this incomprehensibly gigantic number was the figment of some paranoid Treasury Department beureacrat’s imagination that I actually had to 1) read this paragraph over a good four or five times, before succumbing to a mild panic attack, 2) actually check to see that I was reading the New Yorker, instead of that day’s New York Post and 3) consult an expert on the matter, who, terrifyingly, confirmed that this number isn’t bullshit after all:
It’s hard enough to understand credit-default swaps when you know what they are; if you don’t know, forget it. But since they are one of several inventions that may sink this city, and maybe the country, into a new era of penury and thrift, if not downright depression, let’s have a go: a credit-default swap is a financial contract between one party and another which protects against a default on a debt. The trick on Wall Street has been to negotiate and trade them like crazy; there are sixty-two trillion dollars in credit-default swaps outstanding. The question of their worth has mystified even the druids who created them, especially because, it turns out, the swaps haven’t really insured against anything.