I think Archy is getting to the crux of the matter with acknowledgment that there is a disproportionate benefit ratio tailored to elitists expectations and sums it up well with the transaction concern that leaves little in the peripheral finance level, which ultimately answers my question as to whether there is social value in all this. Pat obviously covers a crucial issue with regulatory integrity, we must recognize that historically some regulatory practices have been less effective and more detrimental than no regulation. So it is important that we establish a regulatory system that works, that functions in accordance with its intended purpose. How we can arrive at this is seriously problematic but I think it would be impinging up the members of the regulatory commission. I've never been impressed with computer models so I don't know about going in that direction; I rather tend to predict weather by viewing isobars, pressures systems and jet streams than computer simulations. The current situation is obvious, it was a free for all trade and swap frenzy which led to moronic risk taking by foaming at the mouth, over zealous investors that were too focused on the mega profits to partake in clear headed decision making. This mentality M O is not confined to this monetary arena. The stories of overnight millionaires going broke are endless including multi-millionaire lotto winners who find themselves penniless in a matter of a few years. However, that is on a personal level with minor fallout ramifications while on the other hand the derivative market, seemingly innocent on the surface, can have some very serious, far outreaching and devastating consequences on a local and global level. Right now I'm thinking about the BP oil catastrophe in the Gulf of Mexico that is going to decimate thousands of acres of land and reduce fishery lively hoods to fish tank status in a matter of hours. But the point here is this............. This is the perfect example of a derivative market. Will the cost of shrimps go up, will the cost of petroleum go up, crawfish, oysters or in all actuality will the market cease to exist because of food safety issues? Who will invest in the industry? Who is scrambling to make pre-disaster investments? I bought extra-large shrimp tonight for $4.98 a pound, picked up 20 lbs for the deep freezer because I'm thinking that the price of shrimp is going double over the next month. Sure I gamble but I also picked up $200 on a $2 scratch off so I can afford to spend the money on the shrimp that I think is going to be worth double what I paid for it. Okay, now translate that into the mega bucks world and see that people are going to be buying futures just based upon this BP quagmire. Where is the social value in that? Prices are going to go up just on speculation.
On Apr 30, 3:35 pm, Don Johnson <[email protected]> wrote: > Good thread Slip. Wouldn't it be nice if folks would only bet what they can > afford to lose? Maybe if they felt they would actually have to pay for > their own mistakes they'd be a bit more circumspect. Preventing 'too big to > fail' is key. The complexities boggle my mind. > > dj > > On Sat, Apr 24, 2010 at 12:58 AM, 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 Market > >http://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]<minds-eye%[email protected]> > > . > > For more options, visit this group at > >http://groups.google.com/group/minds-eye?hl=en.
