Читать книгу Financial Cold War. A View of Sino-US Relations from the Financial Markets онлайн

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Growth in derivatives trading from the 1980s has been explosive. This was fuelled by a set of factors that each reinforced the others: growth in financial markets; consequent greater demand for hedging tools; product innovations by the financial industry; a larger supply of graduates with the necessary quantitative skills; and technology-enabled electronification of financial trading. The pros and cons of this growth are explored in ssss1; however, the development of these derivatives has been critical in consolidating the dollar's global position.

As of the end of 2020, the total notional value outstanding of all derivatives contracts was estimated to be $667 trillion.ssss1 This compares to the $110 trillion combined market capitalisation of all stock markets in the worldssss1 and $139 trillion in total debt outstanding in global bond markets.ssss1 It is also roughly 7.9 times the size of global GDP. These contracts are vital to the smooth functioning of international trade and financial markets, as they allow businesses and individuals to manage their risks across foreign exchange, interest rates, credit, stocks and commodity prices. To be effective risk management tools, derivatives must be liquid and, preferably, supported by infrastructure such as clearing houses to help minimise counterparty risks.ssss1 Given the sheer size of this ecosystem of products and infrastructure, it would be extremely difficult for this system to be replaced. And since the vast majority of these derivatives are priced in US dollars, the growth and standardisation of derivatives contracts in the past half-century has powerfully entrenched the role of the US currency.