Derivatives: The Unregulated Global Casino for Banks

[amazingIndustry]

sure its gonna come but a second later we need to invent leveraged bananas that are traded OTC. To add to the complexity (complexity = we can charge more) lets genetically alter them in order to create new *varities*. We could go back to the tulip trade but it would be boring. Point is, snake oil sales men will always invent a new "structured" product to sell, anything that makes money and fuels the dream of the stupid. Look, as simple a derivative as interest rates swaps were misunderstood and bankrupted whole counties. How is this not gonna happen again?

Call me a pessimist but this is how a few of us are programmed: Some kill someone to get their money, others act fraudulently, some others are very comfortable getting into and even beyond the grey zone. The rest do not work in finance and are normal salaried workers...

Quote from sle:

I take it you got nothing factual to say about the topic?

In any case, the actual derivatives market risks are really not as scary as people paint them to be, especially once you net them out. What is scary is the amount of concentrated exposure to single "key" counterparties. While agressive CSAs etc have gone a long way to mitigate this, i definitely feel that a switch to a centralized clearing house or (even better) a transparent exchange-style model is the right way to go.

 

[Martinghoul]

Quote from amazingIndustry:
But this, in summary, is the very precise reason we are far away from ever fixing anything. Politicians, CEOs, traders, anyone is only in for the short haul, collect your bonus, and get the fuxx out of here. Hell can break lose after I am gone. Isnt that the overall mentality? Politicians who speak the truth before any election are absolutely un-electable. I wished, we could crash and clean out the whole system and start over but I am afraid this aint gonna happen.

Mate, you're asking me a very deep philosophical question that great minds since Heraclitus have been trying to answer. I don't really know what to tell you, except that I, personally, don't have either great aspirations to "fix" things or hopes that things get "fixed". Our institutions and society are the way they are for a reason. Specifically, they're structured in a way that optimally corresponds to our current level of ethical and moral development. Experience shows that attempts to build societies that are either significantly more or less "just" than what we can handle are eventually doomed to spectacular and painful failure. On the other hand, as history shows, humans are pretty good at bumbling along and incrementally progressing, in every way. So, really, to answer your question, there is no "solution" or "fix" that magically happens and makes things right. We're likely doomed to carry on in our slow, contradictory and imperfect way. The only way to make it a little better is for everyone individually to live by the immortal words of Shakespeare, who I think summarised it best:

"This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man."

That's always been the answer, as far as I'm concerned. Anyways, this is really all too philosophical.

 

[sle]

Quote from pythontrader:

This is really interesting. You still couldn't get my point? Your first paragraph is an ad hominem remark. The second one proves you didn't get the point.

PS: stop confusing FACTS with statistics, assumptions and opinions.

Your point, rather plainly, is that you are the only smart guy in the room and everyone else is a moron and "does not get it". Otherwise, it appears, you have nothing factual to say and have no useful analysis to add.

 

[amazingIndustry]

you sound like as if everyone is exactly the same, everyone shares an identical conscience which is obviously not the case. I guess the ignorant and abusers indeed to not worry about life nor try to fix a thing, its the few who still safeguarded their conscience that struggle.

Quote from Martinghoul:

Mate, you're asking me a very deep philosophical question that great minds since Heraclitus have been trying to answer. I don't really know what to tell you, except that I, personally, don't have either great aspirations to "fix" things or hopes that things get "fixed". Our institutions and society are the way they are for a reason. Specifically, they're structured in a way that optimally corresponds to our current level of ethical and moral development. Experience shows that attempts to build societies that are either significantly more or less "just" than what we can handle are eventually doomed to spectacular and painful failure. On the other hand, as history shows, humans are pretty good at bumbling along and incrementally progressing, in every way. So, really, to answer your question, there is no "solution" or "fix" that magically happens and makes things right. The only solution is for everyone individually to live by the immortal words of Shakespeare, which I think summarised it best:

"This above all: to thine own self be true,
And it must follow, as the night the day,
Thou canst not then be false to any man."
That's always been the answer, as far as I'm concerned.

Anyways, this is really all too philosophical.

 

[Martinghoul]

Quote from amazingIndustry:
sure its gonna come but a second later we need to invent leveraged bananas that are traded OTC. To add to the complexity (complexity = we can charge more) lets genetically alter them in order to create new *varities*. We could go back to the tulip trade but it would be boring. Point is, snake oil sales men will always invent a new "structured" product to sell, anything that makes money and fuels the dream of the stupid. Look, as simple a derivative as interest rates swaps were misunderstood and bankrupted whole counties. How is this not gonna happen again?

Call me a pessimist but this is how a few of us are programmed: Some kill someone to get their money, others act fraudulently, some others are very comfortable getting into and even beyond the grey zone. The rest do not work in finance and are normal salaried workers...

Of course, it's all gonna happen again. We just do whatever we can to a) make the odds of it happening lower; b) minimise the impact on the system as a whole, by understanding the fragility issues. It's like fires and the advances in fire-fighting. Nobody can guarantee fires won't happen, but you can try to make sure that, when time comes, you don't lose half a city and thousands of people, which was normal not too long ago.

 

[Martinghoul]

Quote from amazingIndustry:
you sound like as if everyone is exactly the same, everyone shares an identical conscience which is obviously not the case. I guess the ignorant and abusers indeed to not worry about life nor try to fix a thing, its the few who still safeguarded their conscience that struggle.

No, that's not my point... My point is that "fixing" is, first and foremost, about each one of us individually. Institutions and society as a whole will inevitably follow when/if most of us "fix" ourselves. To me, there's no other way, really, in the very grand scheme of things.

 

[amazingIndustry]

a true believer of the wonder-self- healing powers of the financial eco system. Praise to our mortgage sales people, and swaps traders, and exotic quants, and high frequency gurus, and everyone else who loves to screw, penetrate, push, shuffle. Welcome to the all new episodes of THE HUSTLE.

Where have we now better safeguarded the system than before?
We still have the Citis, BoA, ...bigger than ever, and ironically those very banks are gonna bend over just to get their bids in for Maiden Lane, funny isnt it...

Its just that 2008 is still fresh in most our memories, was it another 10 years away there would not be the slightest improvement than at that time. Or has anything changed in 2008 relative to the implosion of the IT bubble, LTCM, ...

Quote from Martinghoul:

Of course, it's all gonna happen again. We just do whatever we can to a) make the odds of it happening lower; b) minimise the impact on the system as a whole, by understanding the fragility issues. It's like fires and the advances in fire-fighting. Nobody can guarantee fires won't happen, but you can try to make sure that, when time comes, you don't lose half a city and thousands of people, which was normal not too long ago.

 

[sheda]

Quote from amazingIndustry:

a true believer of the wonder-self- healing powers of the financial eco system. Praise to our mortgage sales people, and swaps traders, and exotic quants, and high frequency gurus, and everyone else who loves to screw, penetrate, push, shuffle. Welcome to the all new episodes of THE HUSTLE.

And your just the most honorable man on earth yay!

 

[Martinghoul]

Quote from amazingIndustry:
a true believer of the wonder-self- healing powers of the financial eco system. Praise to our mortgage sales people, and swaps traders, and exotic quants, and high frequency gurus, and everyone else who loves to screw, penetrate, push, shuffle. Welcome to the all new episodes of THE HUSTLE.

Well, pls be sure to let me know when/if you figure out a way to prevent people from "screwing, penetrating, pushing, shuffling". Until such time, I do believe my suggestion is infinitely more practical.

And yes, I am also unhappy about the fact that we have seemingly not learned our lesson of the 2008 crisis, esp as far as TBTF banks are concerned. But that's a function, unfortunately, of the power of the financial-political oligarchy that is unable to comprehend the risks it's running. However, things are, arguably, progressing and there's a lot of people high in the hierarchy that understand the various issues a lot better than they used to. So let's be thankful for small blessings and do what we individually can to get people to understand.

 

[amazingIndustry]

I added a little to my previous post. My point was the system is more toxic than it ever was. Stress levels in the markets are obviously a lot lower, however, we have practically gotten rid of the fiat monetary system. All we did was shift debt into the future. We still believe both, growth and austerity can be had at the same time, albeit half of the world is criticizing Germany. This is not a personal issue, its a collective problem. And what is your point?

Quote from sheda:

And your just the most honorable man on earth yay!