richardhutnik said:
In regular markets, why does one need to have credit default swaps? Looks to me, what you with what you suggest is form interconnections that make the downside of risk far larger, when the abnormal happens. The problem is with irregular markets taking down the entire financial industry and causing the economy to go to a screeching halt as it had been. Do you have answers for the large number of working people who lost their jobs, and have a hard time standing a chance getting work back, because of "well, in normal times, it is safer"? Having incremental failing in normal times enables people to be able to find work. Cascading failure that happens when you interconnect things, does not. |
You risk cascading failure when something VERY unusual happens to lower risk everywhere else.
What do you say to people when something happens that was literally thought to be impossible?
I'm sorry, something happened that was literally thought to be impossible, by everybody... until like a year before it was going to happen.
I mean, what can be done about derivitives now?
Nothing.
Derivitives are worth more then 10 times the GDP of the world? I mean, what do you think the effects of deflating that would be? I can't see it being pretty... i can see it only causing way more unemployment and freezing credit even worse then it's frozen now.
Even the most conservative of "Cleaning house" plans would tie up so much money that otherwise would be used specifically TO hire people.
Without derivitives, a lot of those jobs that were lost might not exist, and with the new derivitives legislature planned... they might not come back.
