Satyajit Das: The Japanese And Grecian Derivatives Con Games Coming To A United States Near You.
I think we are the only source anywhere who has called for the ban of derivatives within our banking system. Period. Hedging does not mean risk goes away. Hedging within the context of a financial system where a handful of firms are involved in 90% of all derivatives activity is a bad joke. Under this dynamic risk is not contained one iota. In the case of Wall Street, the great risk shift is always onto grandma and people on food stamps while criminally-culpable con artists walk off with society's money. Now these same con artists write about "solutions" such as the need to cut Social Security in order to maintain that criminal risk-shifting. Financial engineering as taught in the world's greatest universities is worse than lipstick on a pig. It is nothing more than bat shit wrapped in a $250,000 education and topped off with a bow.
Even nonfinancial firms using derivatives to hedge has turned into a con game. Let me give you two examples. An airline has to use financial hedging to manage its risks against rising oil prices. This additional expense is needed because financial firms speculating in the oil markets have become the largest single variable behind supply-and-demand driving the price of crude oil. So, Wall Street's involvement in the oil derivatives market necessitates the demand of financial derivatives by nonfinancial firms such as airlines. The same is true with the grain markets where more and more farmers must hedge in the futures markets to ensure their harvest prices are protected because Wall Street is manipulating the price of grains. All of this lines Wall Street's pockets. The whole system is a massive fraud. More and more companies require greater and greater use of financial hedging products (a massive tax levied by a corrupt financial system) when the reality is the only reason this is necessary is because of the underlying fraud of financial firms. A perfect analogy to this dynamic is the old joke about one's head hurting. ie, One day someone says their head hurts. His friend asks why. The person whose head hurts states that he keeps hitting himself in the head, to which his friend replies, well quit it. We need to quit hitting ourselves in the head. ie, We need to get financial firms out of the commodities and derivatives markets to stop the con game. But in order to do that we need a government that isn't in the back pocket of Wall Street's bribes.
Das goes a step further and states that the Japanese financial mess was allowed to continue because of the great con game using derivatives to hide unrecognized risk. One can obviously conclude the parallels to the fraud we now see in the U.S. financial system. We've already seen Wall Street firms using these repo 105s meant to con regulators and investors just as Japanese banks did. Where does the rot end? No one really knows because our government is complicit so it seeks to sweep the entire fraud under the rug in lieu of transparency. Transparency is necessary for any type of functioning democracy to return to this country.
Das has recently updated his book with a new release this year that focuses on this particular topic. Reference to the book is mentioned at the end of his post. I would highly recommend it for those seeking a deeper understanding. (Btw, Das's article is hosted on Wilmott.com which is some great irony. We have also railed on Paul Wilmott, a driver and proponent of the financial Frankenstein we see before us, as confusing his industry's perceived brilliance with the mask of an ever increasing financial bubble as we have written about since starting this blog. Endless money for crooked and criminal activity does a wonderful job of masking the lies of Wall Street and their beholden political stooges. That includes the fantasy that the Frankenstein finance we see before us actually is of value or even remotely works. Without the backstopping by the Federal Reserve, we would have 30-50% unemployment. In other words, we now see the entire financial system and Wall Street's brilliant mathematical models they spent hundreds of billions of dollars creating is a house of cards. Not only is it a house of cards but it is a house of cards that is a massive tax killing the American economy.
None of this would have happened with a transparent public banking system whose goal was the development of democracy instead of the goals created by a handful of con artists criminally stealing society's wealth.)
Derivatives did not make our country the economic envy of the world. Derivatives participated in the destruction of it. Ban derivatives from our banking system. While we are at it, dismantle the endlessly corrupt Wall Street and replace it with a public banking system. In fact, I could actually envision a democratic, capitalistic financial system where we don't have mutual funds or investments of any sort. That means the hundreds of billions of dollars of taxes we pay annually to Wall Street investment houses to underperform the market could be put to productive use in society. That means we would could finally get rid of the likes of Bill Gross, Mohamed El-Erian and Pimco. Then Neel Kashkari wouldn't be able to live off of the productive people in society, which allows said bureaucrat the free time to write op-eds about why we need to trash Social Security. Obviously this is so the government can afford to borrow more money from Wall Street and line Pimco's pockets in the process.
title link also here.
Even nonfinancial firms using derivatives to hedge has turned into a con game. Let me give you two examples. An airline has to use financial hedging to manage its risks against rising oil prices. This additional expense is needed because financial firms speculating in the oil markets have become the largest single variable behind supply-and-demand driving the price of crude oil. So, Wall Street's involvement in the oil derivatives market necessitates the demand of financial derivatives by nonfinancial firms such as airlines. The same is true with the grain markets where more and more farmers must hedge in the futures markets to ensure their harvest prices are protected because Wall Street is manipulating the price of grains. All of this lines Wall Street's pockets. The whole system is a massive fraud. More and more companies require greater and greater use of financial hedging products (a massive tax levied by a corrupt financial system) when the reality is the only reason this is necessary is because of the underlying fraud of financial firms. A perfect analogy to this dynamic is the old joke about one's head hurting. ie, One day someone says their head hurts. His friend asks why. The person whose head hurts states that he keeps hitting himself in the head, to which his friend replies, well quit it. We need to quit hitting ourselves in the head. ie, We need to get financial firms out of the commodities and derivatives markets to stop the con game. But in order to do that we need a government that isn't in the back pocket of Wall Street's bribes.
Das goes a step further and states that the Japanese financial mess was allowed to continue because of the great con game using derivatives to hide unrecognized risk. One can obviously conclude the parallels to the fraud we now see in the U.S. financial system. We've already seen Wall Street firms using these repo 105s meant to con regulators and investors just as Japanese banks did. Where does the rot end? No one really knows because our government is complicit so it seeks to sweep the entire fraud under the rug in lieu of transparency. Transparency is necessary for any type of functioning democracy to return to this country.
Das has recently updated his book with a new release this year that focuses on this particular topic. Reference to the book is mentioned at the end of his post. I would highly recommend it for those seeking a deeper understanding. (Btw, Das's article is hosted on Wilmott.com which is some great irony. We have also railed on Paul Wilmott, a driver and proponent of the financial Frankenstein we see before us, as confusing his industry's perceived brilliance with the mask of an ever increasing financial bubble as we have written about since starting this blog. Endless money for crooked and criminal activity does a wonderful job of masking the lies of Wall Street and their beholden political stooges. That includes the fantasy that the Frankenstein finance we see before us actually is of value or even remotely works. Without the backstopping by the Federal Reserve, we would have 30-50% unemployment. In other words, we now see the entire financial system and Wall Street's brilliant mathematical models they spent hundreds of billions of dollars creating is a house of cards. Not only is it a house of cards but it is a house of cards that is a massive tax killing the American economy.
None of this would have happened with a transparent public banking system whose goal was the development of democracy instead of the goals created by a handful of con artists criminally stealing society's wealth.)
Derivatives did not make our country the economic envy of the world. Derivatives participated in the destruction of it. Ban derivatives from our banking system. While we are at it, dismantle the endlessly corrupt Wall Street and replace it with a public banking system. In fact, I could actually envision a democratic, capitalistic financial system where we don't have mutual funds or investments of any sort. That means the hundreds of billions of dollars of taxes we pay annually to Wall Street investment houses to underperform the market could be put to productive use in society. That means we would could finally get rid of the likes of Bill Gross, Mohamed El-Erian and Pimco. Then Neel Kashkari wouldn't be able to live off of the productive people in society, which allows said bureaucrat the free time to write op-eds about why we need to trash Social Security. Obviously this is so the government can afford to borrow more money from Wall Street and line Pimco's pockets in the process.
title link also here.
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