Sunday, the program “60 Minutes” took a look at one of the major causes of our financial crisis: DERIVATIVES. I have talked about them a number of times but it is hard to understand and “60 Minutes” tried to explain them to the average Joe.
Basically, “Derivatives” were described as “side-bets”. They showed a football game going on and then showed the public in the stadium and explained that the spectators are not “in the game” but can bet on the game’s outcome (gambling).
Take that scene into a business situation where an individual or a hedge fund buys insurance (bets) on a deal between two other entities. Let’s say a Hedge Fund purchases / bets that a certain bank will fail or a certain company will default on a specific loan; the Hedge Fund is not involved in any of the businesses it is betting on, it is just betting that something will or will not happen.
We all know that in sports betting, if the money amount is high enough sometimes the bettor tries to influence the outcome to his advantage by maybe bribing a player to shave some points, etc. The same can happen in business, where “short-sellers” have been known to influence the way a stock moves, obviously in the direction that they bet on.
I mentioned before that this supposed financial activity is pure gambling and not a productive activity that benefits our economy. 60 Minutes said that this specific activity was illegal and deemed a crime not long ago but Wall Street somehow convinced the bozos in Washington to legalize it for them.
You may wonder how this gambling could have effected our economy so much, well all you have to know is that this gambling activity involved TRILLIONS of dollars and any activity involving those sums has got to cause quite a ripple in our economy and it has.
This type of irresponsible action on the part of our Congress and Wall Street types needs to be hung up for all to see and maybe throw rotting fruit at. New regulation banning gambling on Wall Street needs to happen immediately but I am leery about any punishment ever visiting the people that caused all this and that is disconcerting to me.
Because our Treasury Department is headed by a former Wall Street biggie; I’m pretty sure he will try to protect his buddies as best he can.
I just don’t want this financial mess to be placed on only the shoulders of Joe, the home mortgage defaulter; I want the big boys to pay too by not being rescued by our tax dollars but allowed to swing and die.
Basically, “Derivatives” were described as “side-bets”. They showed a football game going on and then showed the public in the stadium and explained that the spectators are not “in the game” but can bet on the game’s outcome (gambling).
Take that scene into a business situation where an individual or a hedge fund buys insurance (bets) on a deal between two other entities. Let’s say a Hedge Fund purchases / bets that a certain bank will fail or a certain company will default on a specific loan; the Hedge Fund is not involved in any of the businesses it is betting on, it is just betting that something will or will not happen.
We all know that in sports betting, if the money amount is high enough sometimes the bettor tries to influence the outcome to his advantage by maybe bribing a player to shave some points, etc. The same can happen in business, where “short-sellers” have been known to influence the way a stock moves, obviously in the direction that they bet on.
I mentioned before that this supposed financial activity is pure gambling and not a productive activity that benefits our economy. 60 Minutes said that this specific activity was illegal and deemed a crime not long ago but Wall Street somehow convinced the bozos in Washington to legalize it for them.
You may wonder how this gambling could have effected our economy so much, well all you have to know is that this gambling activity involved TRILLIONS of dollars and any activity involving those sums has got to cause quite a ripple in our economy and it has.
This type of irresponsible action on the part of our Congress and Wall Street types needs to be hung up for all to see and maybe throw rotting fruit at. New regulation banning gambling on Wall Street needs to happen immediately but I am leery about any punishment ever visiting the people that caused all this and that is disconcerting to me.
Because our Treasury Department is headed by a former Wall Street biggie; I’m pretty sure he will try to protect his buddies as best he can.
I just don’t want this financial mess to be placed on only the shoulders of Joe, the home mortgage defaulter; I want the big boys to pay too by not being rescued by our tax dollars but allowed to swing and die.
Hi Janusz,
ReplyDeleteSo, why should all of humanity be forced to suffer and struggle any longer, now that the entire global financial system has been exposed as a mind-boggling deception, within many other deceptions? No one in their right mind would continue to be enslaved by a proven deception, which is also proven to be undeniable slavery-by-proxy !!!
The derivatives scams alone have grown to more than 20 times the entire global GDP (at last counting) and are now failing because the scam/pyramid scheme broke and exposed the deception for all to see. A significant portion of global wealth and power was created and propped-up using these and other now-proven smoke and mirrors and house of cards illusions and delusions.
These deceptions have grown many times larger than the rest of the entire world economy. Consequently, there is no way that all of the world's governments combined, who themselves borrow so-called "money" from other central-bank smoke and mirror deceptions, can solve this debacle, by using more smoke and mirrors money scams. The only solutions they are offering will take centuries to repay, if ever.
Here is Wisdom...