James Rickards: Derivatives Should Be Banned From Financial Markets
Submitted by PWA on Mon, 07/16/2012 - 14:04by James Rickards | US News
The idea that the financial products known as derivatives pose a danger to the financial system is nothing new. Commentators have been pointing this out for years. Most famously, Warren Buffett referred to derivatives as "time bombs" and financial "weapons of mass destruction." Recently a complex derivatives trade caused over $5 billion in losses at J.P. Morgan.
Derivatives are bets between two parties that are made today with a payoff in the future based on the value of some stock, bond, or index. One party will profit if the reference security or index goes up in value and the other party will profit if it goes down. These bets usually settle up every three months based on value at that time, and then a new calculation period begins. There are many variations on this basic pattern, but almost all derivatives involve some form of a bet in which gains and losses are calculated and settled-up periodically.
If derivatives are as dangerous as the commentators suggest, why are they permitted? If they are such a threat to the financial system, why does the size of derivatives bets continue to grow? The answers have to do with several myths the big bank derivatives players have created. These myths are false and distract interested parties from doing what needs to be done to ban derivatives. It's time to demolish these myths once and for all.
http://www.usnews.com/opinion/blogs/economic-intelligence/20...
I don't think this will solve
I don't think this will solve anything.
You can ban derivatives; the bankers will just come up with new ways to gamble.
Plan for eliminating the national debt in 10-20 years:
Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...
Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a
That is why banking should be
That is why banking should be further deregulated. More bank failures would rid us of companies who take excessive risks and investors would stick (in large part) with companies who protect investments.
www.gunowners.org
I don't know. If that were
I don't know. If that were true, why are shittybank and crap of America still chugging along? Why has not Wells Fargo jumped to the top? Why do people continue to give their money to all these big investments companies that screwed it up so badly?
Investors/the market is a lot more stupid and ignorant than people like to think. Bankers prey on this. The solution is to bring everything to light, by force if necessary.
Plan for eliminating the national debt in 10-20 years:
Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...
Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a
They still chug along because
They still chug along because they are bailout recipients. I receive no bailouts, yet I've managed to spread my risk around and have managed to grow my investments post-crash. I ignore "professional" advice and have done OK for myself 'on paper'. If I sold everything today, I could retire, but I'd also pay a hefty tax penalty.
www.gunowners.org
Get rid of fractional reserve
Get rid of fractional reserve banking and stop allowing banks to overleverage themselves and problem solved. Then we won't have 260 trillion worth of worthless derivatives.
Let's also remember money is just an instrument to make the transition of goods easier and to hold wealth. The latter it is not doing a good job in due to inflationary practices at the Fed.
There is nothing inherently wrong with derivatives
Bailing out those who practice dangerous investing is what is inherently wrong. Those who practice high risk activities should fail or succeed without the insurance of picking the public's pockets.
www.gunowners.org
This is very true.
This is very true. Unfortunately, the precedent has been set.
There is also the true problem where so few institutions control so much of the economy, that one or two "failures" can lead to massive problems for the rest of the economy. Power to drive the economy has been concentrated, and we're now all controlled by that power.
It wasn't like it was 50 years ago. The power was more divided, and there was more competition rather than "cooperation".
Plan for eliminating the national debt in 10-20 years:
Overview: http://rolexian.wordpress.com/2010/09/12/my-plan-for-reducin...
Specific cuts; defense spending: http://rolexian.wordpress.com/2011/01/03/more-detailed-look-a
Power is only allowed to
Power is only allowed to concentrate due to intertwined interests of government. I'm probably preaching to the choir, but I think we all know this is a bad idea.
www.gunowners.org
you dont have to ban them you
you dont have to ban them you just have to starve them by dumping the Fed, FDIC, and bailouts
23
Yes, and
coming up with competitive forms of currency:
http://www.dailypaul.com/244168/july-4th-2013-liberty-day-ch...
Perhaps together we can investigate and find a way to quit paying for our own demise.
There is no use for derivatives or fractional reserve banking.
Derivatives are simply gambling, and reserve banking allows too much credit and people to live beyond their means by loaning "money" that does not exist and is nothing more than a keyboard entry made out of thin air. Stop these and the whole world will know peace and prosperity and get back to living rather than being slaves to banks and government.
beephree
FRB doesnt create money, the
FRB doesnt create money, the Fed does. FRB creates credit, a money substitute.
23
I may not agree with his
I may not agree with his approach at time but "timmay00" is correct with his assertion. Understand me posting this article was to an endorsement for banning derivatives but open individuals minds to other individuals perspectives so they can become better informed. If you as an individual want to ban derivatives that is fine if you want to impose that on yourself or petition others to do the same in the private sector. First step is to better inform yourself on the topic. You can start off at: http://en.wikipedia.org/wiki/Derivative_(finance) and then look at your pension if you have one.
...
"and get back to living rather than being slaves to banks and government."
All while you push for more regulations and more government control. If people want to gamble with their own money, that's their own decision.
Not at all. I want almost no goverment. I want people
to be disciplined enough to take care of themselves and be responsible human beings. And they are gambling with OUR money is the problem. I have zero debt except for the idiotic taxes I must pay. My parents and grandparents taught me to save and not go in debt. I worked my ass off until I could pay cash for my house. Sorry, but we just need the freedom to work hard, save and not have it all taken away or evaporated through taxes and inflation by a bloated government and greedy MoFo central banks.
beephree
it's our money
not theirs. Our productivity is in the company stocks they gamble with. Our deposits are in the hedges they gamble with. Our economy is in the stability and security of the whole system they gamble with. No, the answer is not more regulation, but a public movement to show what is being done so the vast majority will deem them too big to exist.
Why are there so many lefties here?
There are plenty of legitimate uses for derivatives, the problem is the government backstopping and perverse incentives which lead them to being so highly misused.
Lets use our brains productively
“Lefties” Sadly you need to grow up and open that brain of yours to others individuals perspectives. Do I hold the same derivatives position you? YES but do I seek out other perspectives to better my understandings of their individual’s perspectives? YES
You should use that BRAIN of yours productively and get off DailyPaul.com sign-up to a quote “Lefties” blogs to better inform these individuals of the flaws in their ideology. Sign-up to a pro-neocon or war blog and have constructive dialogue with these individuals. You’ll find out a majority of them are just misinformed and instead of childish name calling and demagoguing or acting as if your mightier than thou because your just a little more AWAKE then they are provide them with creditable sources or raw video evidence.
Use the Tom Woods approach I have brought even more people to the rEVOLution then I did with bashing other human beings and down votes.
Also for when or if you attempt to childlessly attack me further after this replay note work I’ve done for the liberty movement within the few short months of joining the rEVOLution after being a political atheist. I’m a recently elected committeeman and will be running for city council in the next election, have started a Young Republican Party in my County 270 strong in an urban Democratic stronghold, created 35+ conservative business coalition that now accepts the GOLD dinar as a means of exchange parallel with the dollar, we do voter registration drives every month (300+ registrations and counting I got 3 this morning from random strangers on my way to work) and we do community workshops every month. Last month we did an Austrian economics workshop and had 50 attendees. A good portion of them are reformed quote “Lefties” which you have so much disdain for. I should have told them NO we don’t want you to enlighten yourself and become Libertarians. Stay liberal so I can complain all day and feel good about myself on DailyPaul.com instead of doing something actually productive for society in my community.
You know what it would be better if you didn’t respond to me until you have gotten every household in a 2 block radius of your residence registered to vote and have attended at least 1 city council meeting this week. When you can at least just do those at a minimum for the liberty movement respond to me so we can have a discussion about how we can better get people involved in the rEVOLution.
Bless