On 24 Apr, 06:58, Slip Disc <[email protected]> wrote: > We know that some people have made fortunes but is there really any > social value to what seems to be just gambling. Have we really gained > anything as a society or has it caused more ruin? > > Almost a year ago US Treasury Secretary Tim Geithner wants to regulate > the derivative > market.http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/53212... > > The wiki definition;http://en.wikipedia.org/wiki/Derivative_%28finance%29 > > Criticisms of the Derivative > Markethttp://en.wikipedia.org/wiki/Derivative_%28finance%29#Criticisms > > Below that the benefits which are clearly outnumbered by the > criticisms > > NPR discussion on the Diane Rehm show which you can listen to > here:http://thedianerehmshow.org/shows/2010-04-23/news-roundup-hour-1 > AUDIO:http://thedianerehmshow.org/audio-player?nid=12352 > > JeffreyC wrote: > > Diane, > > I am a dedicated listener and I love your show. However, today I was > very upset that none of your guests new anything about derivatives. > Their inability to describe how derivatives increase social welfare > demonstrates what little they know of finance and economics. More > upsetting is how they pretended to know and still commented, spreading > misconception and falsehoods. > > DERIVATIVES allow institutions to hedge against uncertainties, > effectively reducing risk and volatility in earnings and investment. > This is good for business as more predictable cash flows allow for > better planning and increased investment. This has a direct positive > effect on the welfare of an economy. Also, speculators are necessary > to ensure that all hedgers are able to place their hedges. The > speculator thus provides needed liquidity since all transactions need > two participants. > > THAT being said, the real topic is whether or not derivatives > transactions should only take place on a transparent exchange. > > PLEASE try to have someone trained in economics or finance on your > show when discussing matters of this type. Thank you. > > -- > You received this message because you are subscribed to the Google Groups > ""Minds Eye"" group. > To post to this group, send email to [email protected]. > To unsubscribe from this group, send email to > [email protected]. > For more options, visit this group > athttp://groups.google.com/group/minds-eye?hl=en.
It has caused much ruin. The amount of losses in the trading of derivitives is huge in comparison to other aspects of the market. On the order of 2-3 orders of magnitude. And it's not discussed as much. Of course, like all other aspects of the market, it's gambling, pure and simple. Although, unlike some markets, like commodities, it's as airy-fairy as it gets. Weather derivitives, for example. The social value is the same social value as gambling offers. Risk. Potential gain for no real effort (if you do well) or loss of all effort (if you don't). It's that 'chance' that you might undeservedly get that ever-so-elusive 'something for nothing'. Is it worth it? That would be a personal choice (yes, I use the word loosely). Social value? Well, again, the answer you would get from a winner on the derivitives market would differ from the answer you would get from a loser on the same market. Like all gambling, it's safer to just avoid it.
