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Why weren't derivatives discussed on the debate.

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  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    Every financial news source says that derivatives are ready to implode at any time. The precipitating conditions are greater now than in 2008. Why wasn't that debated.
  • Independent
    Ft.myers, FL
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    Chet Ruminski Wrote: Every financial news source says that derivatives are ready to implode at any time. The precipitating conditions are greater now than in 2008. Why wasn't that debated.

    Chet, you should know! Wall Street is an entity on its own, barely touched by regulations, no one wants to touch that because of dire consequences. Any corrupt analyst can make the market crash. Throw in a "fear" factor, or if an company earns a penny less, they will torpedo a company into bankruptcy. That is their hobby.

    Look at Volkswagen; sure they made a mistake; however if you look at school busses all trucks, trains, aircraft, construction equipment, powerplants etc. they spew out a hell of a lot more junk than any little Volkswagen. But once the lawyers and Wall Street gets its hands on it then they use any filthy tactic to get billions out of it.

    The same with Apple, it lost a lawsuit against a University in Wisconsin, because of a patent infringement, now these lawyers are looking at just about a billion in fines; Apple stocks get impacted and the little man is duped. I read that 90% of all lawyers in the world live here; that says enough. Sorry this is another thing which happens only here. In Europe there are limits on any law suits and a hell of fewer lawyers.

  • Democrat
    Missouri
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    Part of what was said may be true, however, you must qualify which derivative you are talking about. Derivative is a value placed on an asset, which an asset can be anything in the stock market, agriculture, automobile manufacturing, metals, utilities, transportation, real estate, chemicals, and whatever. If the value placed on a stock option is some amount that you can say that the derivative is the value. Values go up and down all the time and it is common for the investor to play the market depending on his/her risk to take. If you don't play you'll never win and thusly, if you don't play you don't lose. Those that play successfully win a lot more than those who don't play and place there meager earnings in a bank. At today's interest rates placing your money in the bank is like putting money under your mattress.

    So, please define what derivatives you speak of because its questionable on the truth you post.

  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    AmcmurryFreedom Wrote:

    Part of what was said may be true, however, you must qualify which derivative you are talking about. Derivative is a value placed on an asset, which an asset can be anything in the stock market, agriculture, automobile manufacturing, metals, utilities, transportation, real estate, chemicals, and whatever. If the value placed on a stock option is some amount that you can say that the derivative is the value. Values go up and down all the time and it is common for the investor to play the market depending on his/her risk to take. If you don't play you'll never win and thusly, if you don't play you don't lose. Those that play successfully win a lot more than those who don't play and place there meager earnings in a bank. At today's interest rates placing your money in the bank is like putting money under your mattress.

    So, please define what derivatives you speak of because its questionable on the truth you post.

    AmcmurryFreedom, It is not specific derivatives but derivatives as a function of and absorption of the market. Since the CFMA expanded the definition of derivatives and further immunized them from regulation. The derivative notional and real value has expanded not as a service to the economy but to take advantage of the immunity. Consequently money that had been available for starting, maintaining and expanding the industrial part of the economy has been absorbed by the derivative market. Not only as investing money but as securitizing the derivatives. That caused loss of jobs.
  • Liberal Democrat
    Democrat
    Colorado Springs, CO
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    Chet Ruminski Wrote: Every financial news source says that derivatives are ready to implode at any time. The precipitating conditions are greater now than in 2008. Why wasn't that debated.

    Chet asks a good question, and the simple answer is that derivatives are much too complicated for the average American, and except for a very few people in Congress like Elizabeth Warren, politicians are not going to show their ignorance. But the question that Chet asked is a good one...just not for a debate of this sort where any answer that exceeds the normal length of a "sound bite" becomes lost in the mind of the listener. Anyway, getting back to Chet's concern, this article is a starting point for discussions:

    Global Research, August 24, 2015: Global Derivatives: $1.5 Quadrillion Time Bomb

    ""When investing becomes gambling, bad endings follow. The next credit crunch could make 2008-09 look mild by comparison. Bank of International Settlements(BIS) data show around $700 trillion in global derivatives.

    "Along with credit default swaps and other exotic instruments, the total notional derivatives value is about $1.5 quadrillion – about 20% more than in 2008, beyond what anyone can conceive, let alone control if unexpected turmoil strikes."

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    AMC is right to ask what form of derivatives. A simple look at Wikipedia, will list several forms of derivatives including such instruments as collateralised debt obligations (CDOs), swaps, credit default swaps, futures contracts, options, mortgage backed securities, and options. All are too complicated to have for discussion in a debate. None of these are "evil instruments" by themselves. They work fine if you are dealing with honest brokers or professionals that understand that these are highly risky and highly unregulated. Unscrupulous trading in mortgage backed securities is one of the major causes that triggered the Great Recession.

    Just to be clear, I don't necessarily endorse the sense of "panic" conveyed in the Global Research article. However, it's a good starting point for debating.

  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    Here is my take on the outcome of the article. Consider the national interest. A concept that has substantiated every action conceivable to promote the national interest. So what is the national interest. I believe it is framed by life, liberty and the pursuit of happiness. It is no stretch of the imagination to see that certain aspects of the financial dealings of traders diverts money to functions that produce no or have any value. These functions operate parasitically off of a host. They only reduce value of the host through fees. Fees become a source of income without rendering a product or service. Since the fees are now a source of income, activity has to be created to supply fees. This activity stops when interest in the host is less than the value of a host. When the host becomes devalued and survives it then enters into the income producing cycle again. There are fee payers and fee collectors. The fee payers never own anything in proportion to what they pay. The fee collectors only collect and furnish no product or service for their collections. The derivative market creates income without providing a product or service. The derivative market produces income without capital investment and becomes the most attractive way to generate income. Consequently the derivative market has expanded to be the largest entity in the world market. This expansion took money away from the smokestack market causing the loss of production and jobs and income. This is the first danger of derivatives. On a national level it is an attack on the national interest. Derivatives have no intrinsic value nor produce any value. Their value is that they produce income without regard to the outcome of events. There is an opposite position on each derivative and that generates the activity. Derivatives began to grow either coincidentally or in response to flash trading. But in either case the interest grows artificially to create a bubble. MThe inevitable collapse of the bubble which causes loss of wealth to the fee payers is the second danger of derivatives. This is my take and my opinion on derivatives. And since the derivative market is so big that it jeopardizes the wealth and income of a majority of US Americans then it is in the National Interest to criminalize and regulate derivatives back to their original function of limited activity in futures trading. I can see the importance of basic futures trading in protecting sensitive products susceptible to natural conditions.
  • Strongly Liberal Democrat
    Democrat
    Pensacola, FL
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    The most dangerous part of the build up is the stopping. There are billions of trades made each day by algorithms. I don't know if there is any kind of sensitivity built in but I do know there are parameters within which the algorithms work. Approaching those limits does not as far as I know generate a mathematical responsible apprehension. Hitting those limits will cause stops or reversals without any considerations. Making abrupt changes to the 6 million a second trading rate has to have disastrous consequences. Especially when you consider what a 300 or so drop in the Dow does. If there was an apprehension built in 2008 would not have happened, but that would have required a conscience. That is a true too big to fail scenario that should be being addressed right now.