Credit Default Swaps = proof most politicians have no clue how to avoid a financial crisis

marke · Feb 20, 2020

Credit default swaps were probably one of the financial gimmicks among several which did more to cause the 2008 collapse than any other instrument. But when politicians and the media refuse to admit that fact they demonstrate they are not going to be able to help avoid future financial disasters because they cannot recognize key factors in past disasters.

Credit Default Swap (CDS) - A Major Player in the 2008 Financial Crisis

Financial crisis of 2007–08 - Wikipedia

Hawkeye10 · Feb 20, 2020

marke said:
Credit default swaps were probably one of the financial gimmicks among several which did more to cause the 2008 collapse than any other instrument. But when politicians and the media refuse to admit that fact they demonstrate they are not going to be able to help avoid future financial disasters because they cannot recognize key factors in past disasters.

Credit Default Swap (CDS) - A Major Player in the 2008 Financial Crisis

Financial crisis of 2007–08 - Wikipedia

Understand this....and then look at all the crap I get from Failed Intelligentsia Apologists as I over and over claim poor quality work.

Our leaders cant/wont manage the basics anymore.

We are so screwed.

Crovax · Feb 20, 2020

marke said:
Credit default swaps were probably one of the financial gimmicks among several which did more to cause the 2008 collapse than any other instrument. But when politicians and the media refuse to admit that fact they demonstrate they are not going to be able to help avoid future financial disasters because they cannot recognize key factors in past disasters.

Credit Default Swap (CDS) - A Major Player in the 2008 Financial Crisis

Financial crisis of 2007–08 - Wikipedia

Credit default swaps aren’t inherently bad, it’s their lack of regulation and faulty rating systems make them dangerous

marke · Feb 20, 2020

marke said:
Credit default swaps were probably one of the financial gimmicks among several which did more to cause the 2008 collapse than any other instrument. But when politicians and the media refuse to admit that fact they demonstrate they are not going to be able to help avoid future financial disasters because they cannot recognize key factors in past disasters.

Credit Default Swap (CDS) - A Major Player in the 2008 Financial Crisis

Financial crisis of 2007–08 - Wikipedia

As early as 1997, Federal Reserve chairman Alan Greenspan fought to keep the derivatives market unregulated. With the advice of the President's Working Group on Financial Markets, the U.S. Congress and President Bill Clinton allowed the self-regulation of over-the-counter derivatives market when they enacted the Commodity Futures Modernization Act of 2000. Derivatives such as credit default swaps (CDS) can be used to hedge or speculate against particular credit risks without owning the underlying debt instruments. The volume of CDS outstanding increased 100-fold from 1998 to 2008, with estimates of the debt covered by CDS contracts, as of November 2008, ranging from US$33 to $47 trillion. Total over-the-counter (OTC) derivative notional value rose to $683 trillion by June 2008.

Warren Buffet famously referred to derivatives as "financial weapons of mass destruction" in early 2003.

Drawdown · Feb 20, 2020

marke said:
As early as 1997, Federal Reserve chairman Alan Greenspan fought to keep the derivatives market unregulated. With the advice of the President's Working Group on Financial Markets, the U.S. Congress and President Bill Clinton allowed the self-regulation of over-the-counter derivatives market when they enacted the Commodity Futures Modernization Act of 2000. Derivatives such as credit default swaps (CDS) can be used to hedge or speculate against particular credit risks without owning the underlying debt instruments. The volume of CDS outstanding increased 100-fold from 1998 to 2008, with estimates of the debt covered by CDS contracts, as of November 2008, ranging from US$33 to $47 trillion. Total over-the-counter (OTC) derivative notional value rose to $683 trillion by June 2008.

Warren Buffet famously referred to derivatives as "financial weapons of mass destruction" in early 2003.

All symptoms of greed. The markets were (and to some degree still are) obsessed with hitting these 8, 9, 10% hurdles just to keep their stock price up so they simply took on way too much risk in the financial sector.

marke · Feb 20, 2020

Drawdown said:
All symptoms of greed. The markets were (and to some degree still are) obsessed with hitting these 8, 9, 10% hurdles just to keep their stock price up so they simply took on way too much risk in the financial sector.

Greed is a nebulous term. If all politicians know about what caused the financial crisis of 2008 was some vague notion of greed then they will never be able to protect us from future disasters. Warren Buffet said, 5 years before derivatives brought down Wall Street, that derivatives are "financial weapons of mass destruction." A politician may not be able to effectively regulate greed but he can get help from experts to place effective restrictions on derivatives.

Drawdown · Feb 21, 2020

marke said:
Greed is a nebulous term. If all politicians know about what caused the financial crisis of 2008 was some vague notion of greed then they will never be able to protect us from future disasters. Warren Buffet said, 5 years before derivatives brought down Wall Street, that derivatives are "financial weapons of mass destruction." A politician may not be able to effectively regulate greed but he can get help from experts to place effective restrictions on derivatives.

Government "restrictions" on derivatives is even more nebular. Who cares what Warren Buffet said. They are inherently speculative and speculation will never protect people from future disasters. Allowing financial institutions relative unfettered access to a wide range of investments was more the driver of the Great recession as they become far too intertwined.

marke · Feb 21, 2020

Drawdown said:
Government "restrictions" on derivatives is even more nebular. Who cares what Warren Buffet said. They are inherently speculative and speculation will never protect people from future disasters. Allowing financial institutions relative unfettered access to a wide range of investments was more the driver of the Great recession as they become far too intertwined.

The key elements underlying the 2008 collapse were more specific than generalities about bad financial choices driven by greed. The US is in serious debt and it is because of bad fiscal policies driven by greed but there are specific steps which could be takes to deal with specific issues to try to avert disaster and increasing spending fourfold on climate change and healthcare are not those steps.

Having said that, I admit the debt is far too large now to fix. What that means is the country will eventually face a collapse of the monetary system as we know it because the system will reach a point where the government no longer has any money to pay its obligations. And it is not just the US which is in serious debt, but other nations around the world also. I suspect there may be validity to those predictions which suggest there is coming a new world-wide monetary system in which financial transactions will be done by computer and without credit cards. Each individual will have a identifying mark on his hand or on his forehead by which to authorize transactions.

Kushinator · Feb 25, 2020

marke said:
Credit default swaps were probably one of the financial gimmicks among several which did more to cause the 2008 collapse than any other instrument.

This is false. The problem was with regards to regulation of these complex financial products. When the livelihood of our financial system requires the delivery of payment on insurance policies whose value is derived from default... that's a big ****ing problem. The federal government stepped in to guarantee AIG, Fannie, Freddie, etc... could make good on their contractual obligations. Failure to regulate led to the need to bailout.

Vadinho · Mar 5, 2020

marke said:
The key elements underlying the 2008 collapse were more specific than generalities about bad financial choices driven by greed. The US is in serious debt and it is because of bad fiscal policies driven by greed but there are specific steps which could be takes to deal with specific issues to try to avert disaster and increasing spending fourfold on climate change and healthcare are not those steps.

Having said that, I admit the debt is far too large now to fix. What that means is the country will eventually face a collapse of the monetary system as we know it because the system will reach a point where the government no longer has any money to pay its obligations. And it is not just the US which is in serious debt, but other nations around the world also. I suspect there may be validity to those predictions which suggest there is coming a new world-wide monetary system in which financial transactions will be done by computer and without credit cards. Each individual will have a identifying mark on his hand or on his forehead by which to authorize transactions.

Why do you believe the FED or Treasury can ever run out of money to retire the debt? Say they decide to put assets into the Fed equivalent to the entire debt and then pay them all off creating a balance sheet of 24 trillion in one fell swoop? What assets could possibly represent 24 trillion that is at the disposal of the central bank? Same assets that shore up our fiat money, the United States of America. Just create an asset class based upon something intrinsic to our nation and pay the whole thing off. Or just ignore the balance sheet and pay them off anyway. All of this can be done through legislation creating a new world of banking that uses fiat money to pursue national interests. You may say the result will be inflation. Well banks have created trillions of dollars in new money and yet inflation is hardly present.

Credit Default Swaps = proof most politicians have no clue how to avoid a financial crisis

marke

Hawkeye10

Buttermilk Man

Crovax

marke

Drawdown

marke

Drawdown

marke

Kushinator

I'm not-low all the time

Vadinho