184 THE BiG DROP
stroy a city. However, most neutrons do not start nuclear chain
reactions just as most snowflakes do not start avalanches.
In the end, it’s not about the snowflakes or neutrons, it’s
about the initial critical state conditions that allow the possibil-
ity of a chain reaction or avalanche. These can be hypothesized
and observed at large scale but the exact moment the chain re-
action begins cannot be observed. That’s because it happens at
a minute scale relative to the system. This is why some people
refer to these snowflakes as “black swans”, because they are
unexpected and come by surprise. But they’re actually not a
surprise if you understand the system’s dynamics and can esti-
mate the system scale.
It’s a metaphor but really the mathematics behind it are the
same. Financial markets today are huge, unstable mountains of
snow waiting to collapse. You see it in the gross notional value
derivatives.
There are $700 trillion worth of swaps. These are deriva-
tives off balance sheets, hidden liabilities in the banking sys-
tem of the world. These numbers are not made up. Just go to
the IS annual report and it’s right there in the footnote.
Well, how do you put $700 trillion into perspective? It’s ten
times global GDP. Take all the goods and services in the entire
world for an entire year. That’s about $70 trillion when you add
it all up. Well, take ten times that and that’s how big the snow
pile is. That’s the avalanche that’s waiting to come down.■ What Backs the Dollar
All of your assets, whether they’re stocks, bonds or other types
of assets are denominated in dollars. A lot of people say the
dollar is not backed by anything, but that’s not true. The dollar
is backed by one thing — confidence.
If confidence in the dollar is lost, that means that people
almost simultaneously decide that the dollar is not a store of