if you deregulate these guys who are using public money and credit

THat is the definition of a "deregulated" regulated non-free-market.

Derivatives are financial tools used to minimize risk to a given of various underling financial products. Their "success" or popularity seems intimately associated with and dependent on massive credit expanding policies of the Fed, massive degrees of overleverging principle with a good a top heavy inverted pyramid scheme that also requires is helped along by the complex nature of the instruments themselves that effectively allows them to be traded and valued in opaque.

From Russ Roberts recent Econtalk, a Stanford Econ expert expresses some concern as well… I'm not alone methinks but I bet in a year or two you will likely be even more in isolation if you continue to defend the practices on Wall Street that have brought us to this brink. You want to derivative on it… I mean do you want to bet on that.

" Under the surface, some unusual happenings that would make anyone worry. Look at financial system, at 3-month bank lending to each other, unusually high. Suggests banks are worried about lending to each other, unusual risk factor. Due to the fact that there are unusual securities out there, mortgage obligations that people don't know how to assess their value. If housing prices continue to fall, those securities will seem even more suspect. But how will that spread to the rest of the economy? So far, though economy is weak, it could be worse."

from EconTalk John Taylor interview.

methinks, what does he mean by, "there are unusual securities out there"?

Are you effing kidding me? I've never seen you defend anything here – nor are you discouraged when ignored. You blather about Glass-Steagall, opitons, Wall Street, Bankers, "corporatists" and assorted other garbage you don't have a clue about. When asked to defend your position you morph from Muirdiot to Muirduck and pretend you didn't see the post. And you call Russell a coward? This is humour, right?

I've read no less then 4 books that have been recommended here. I have listened to over 20 of the EconTalk interviews start to finish. Some of them I've listened to 2-3 times.

You did all that and still learned nothing? I fear for you patients.

It's glaringly clear that no one has a "good" understanding of how the economy runs and how best to run it when al factors are considered.

Sadly, that realization taught you nothing and proves Russell's point.

Posted by: Russell Nelson

Just BS. If you have such great ideas defend them instead of preaching to the choir.

I've read no less then 4 books that have been recommended here. I have listened to over 20 of the EconTalk interviews start to finish. Some of them I've listened to 2-3 times.

I've just listened to the most recent EconTalk where Russ interviewed John Taylor from Stanford on Monetary Policy. It's glaringly clear that no one has a "good" understanding of how the economy runs and how best to run it when al factors are considered. It is your lack of desire to consider alternatives that is truly set in concrete. My mind is also of a biased human being but itis far from being a closed book.

Yes Russell I have drooling vacuities but of course YOU have the truth. Coward!

Muirdiot, Do explain to us (IN YOUR OWN WORDS) what derivatives are, how they threaten the financial system, and what Glass-Steagall has to do with it.

I know you think that everyone here is as stupid as you are and that's why you insult our intelligence by repeating your inane word vomit ad infinitum in the hopes that we will fall over and agree with you from shear exhaustion. However, you're on the wrong blog for that. We require you to make a cogent argument and we don't tire easily.

Dazzle us! Go!

Posted by: Oil Shock

Because there's no such thing. if you deregulate these guys who are using public money and credit to manipulate markets it's a little like giving the baby a gun to play with. They've shown themselves to be irresponsible children not to be left unattended. It's worse yet because these deregulating them doesn't just let them do what theywant it pretty much means letting them run the show. The guys at JPM or Goldman Sachs are the same guys running the Fed.

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."
Thomas Jefferson,

Posted by: maximus

So talking about $90 trillion of derivatives exposure or the very real bailout that protected kept it taped together is child's play? Insignificant?

The right to talk anything about modern market successes was lost on the day the Fed bailed out Bear-Stearns as if that was the only governmental action that allowed for Wall Streets "success" .

Paul Volcker, former chairman of the Federal Reserve, said: “Simply stated, the bright new financial system – for all its talented participants, for all its rich rewards – has failed the test of the market place.”

Throughout their existence, the Pacific Electric and its predecessor railroads frequently lost money on passenger operations. There were few years when the company's income statement showed a profit, most notably during World War II, when gasoline was rationed and automobiles were not manufactured. Huntington's involvement with urban rail was intimately tied to his real estate development operations. In the pre-automobile era, electric interurban rail was the only way to connect outlying suburban and exurban parcels to central cities. Real estate development was so lucrative for Huntington and Southern Pacific that they could use the Red Car as a loss leader. However, most of the company's holdings had been developed by 1920. As the company's major income source began to deplete, profitability required that the least-used Red Car lines be converted to cheaper buses as early as 1925.

Although the railway owned extensive private rights-of-way, usually between urban areas, much of the Pacific Electric trackage in urban areas was in streets shared with automobiles and trucks, and virtually all street crossings were at-grade, and increasing automobile traffic led to decreasing Red Car speeds on much of its trackage. At its nadir, the busy Santa Monica Boulevard line, which connected Santa Monica and Hollywood, had an average speed of 13 miles per hour, similar to the average speed today on Los Angeles area freeways.

Traffic congestion was of such great concern by the late 1930s that the influential Automobile Club of Southern California engineered an elaborate plan to create an elevated freeway-type "Motorway System," a key aspect of which was the dismantling of the streetcar lines, to be replaced with buses that could run on both local streets and on the new express roads.

As for the death of trolleys, they were losing money long before the bus / tire / oil companies bought them out. This is the conclusion of the experts at railroad.net

It's not a free market system in any way that I can see.

Ok since the NON free market system had a failure recently, how about trying the free market for a change?

Of course you do. I'm sure you are a delightful little man-child. But I think it's time you go spend more time with your patients and practice your coloring book skills. Let the adults talk.

Be careful mocking His Holiness, The Divine Prophet Algore I. That's heresy! One of His acolytes was just recently welcomed back to the Cafe. Watch your back!

Posted by: The Albatross

I wonder if you'd still be saying that if the government hadn't bailed them out so many times and their whole house of cards came down.

From The Big Picture, "WTF? $90 Trillion dollars derivative exposure for JPMorgan ? No wonder the Fed "rescue" of Bear Stearns was via JPM — it was their own derivative exposure that was at risk."

I liked this post,

1) We are all subprime now
2) We are all derivatives now
3) We all are subjected to the massive ponzi financial scheme that's needs to perpetuate to keep the increasingly fake and bullshit US economy going.

Posted by: km4

Is everything really A-OK as with our economy and it's inner workings Albatross? It's not a free market system in any way that I can see. I honestly think it's a ponzi scheme …. I sense dread where you see free market competitive business practices going on just fine.

What's scaring me is you read a book by Al Gore!!!!LOL-just kidding…

This reminds me of Al Gore's (the chicken hypnotist) book. He used to hypnotize chickens as a kid and he basically said the average American is hypnotized by the media the way his chickens were hypnotized by him. Presidential stuff, that.

Hang on. You think this little of the average person, yet you want to give them more power over you?