[T]he market for interest-rate swaps, the largest in the world, is $319 trillion in size, according to the Bank for International Settlements.

This is one of my pet peeves about reporting on derivatives.

This $319 trillion figure is the notional value of all the world's interest rate swaps (IRS) - original BIS report. But if you look just a little to the right, you'll see a thing called "gross market value", which is under $10 trillion for IRS.

What is the difference? Well, if you're talking about the size of Planet Interest Rate Swap, you probably should talk about how much Planet Interest Rate Swap is worth, not a different figure. (Note also that it's gross market value - this is because if you and I have a swap, and it's worth plus $1 million to you, it's worth negative $1 million to me, so together our swap positions are worth exactly zero...but that's neither meaningful or interesting)

To illustrate the difference, say we have a forward contract for a barrel of oil. This agreement says you will buy a barrel of oil for $30 from me in three months. The notional value of this contract is $30. If oil ends up costing $31 when the contract is due, you are able to pay $30 for something worth $31. The value of the contract then is...not $30 (the notional value), not $31 (the spot price), but...$1, because that's what the contract saves you.

So that's how you get market values that are (almost) always much smaller than the notional.

I use the crude oil forward example because it's tangible and simpler, but interest rate swaps work very similarly - a (vanilla) swap is the same as a bunch of forward contracts, like one every three months, and instead of a bet on the price of oil, it's a bet on an interest rate.

This notional value figure, in the hundreds of trillions of dollars and several times global GDP, often gets used breathlessly by journalists and (especially) doomsaying cranks to say "OHMAHGERD, DERIVATIVES ARE HUGE, THEY'RE GOING TO KILL US ALL, RUN FOR YOUR LIVES!!!" but as you can see the figure is highly misleading.

The article doesn't breathlessly say this, which is why I'm charitably not writing it up as an RI, but it's still wrong.

And to add irony, the article is about bad swap accounting.