I don't disagree that the politicians are deeply involved in Wall Street – nor do I disagree that the involvement is a problem. But whose idea was it to involve politicians in Wall Street by proclaiming the activities of the financial markets to be in the "public" interest? The politicians of course. It seems we're going to be spending some time placing blame. So let's place it where it belongs – on the political class.

Just more of the same. You've got nothing to offer but name calling and now threats. You can dish out the name calling but you sure can't take. Yep you definitely fit my impression of the typical Wall Street persona. A steaming bag of crap as worthless as the pieces of paper you push… just a notch below a bank-robber who is at least honest about his intentions and doesn't steal near as much.

Now shut the hell up and don't bother replying to my post in the future if you can't act like an adult.

Posted by: Randy

Randy,

When the Wall Street Cowboys finally got the Glass-Steagall Act repealed after 8 or 9 intensive lobbing efforts…THEN derivatives were made able to infect the public treasury. They would never have survived in the private free market in their current forms. For that the Wall Street Socialist needed Uncle Sam to help them with their evil scheme. After Wall Street got its way into federal funds and loans it gambled big with them and turned them into derivatives. Once the Wall Street Cowboys got THEIR way you HAD NO CHOICE but to purchase their derivatives and all other sorts of toxic Wall Street Frankenstien creations. You now hold this crap in YOUR portfolio.

I've been thinking about the term "publicly traded corporation"? Specifically, what is "public" about a "publicly" traded corporation? Nothing. Nothing at all. Buying stock in a corporation is an entirely individual choice. The use of the word "public" is just an excuse for the politicians to stick there their collective nose in where it doesn't belong. Apply the concept to the conversation above and it is easily seen that, if you don't like derivatives, don't buy them.

When I buy a life insurance policy, I don't expect to buy default swaps on an options trader's leverage in the bargain. When I learn that my insurance company is on the brink of bankruptcy because it has "invested" reserves securing my life insurance payout or my annuity payment in highly risky default swaps that turned out to be worthless, where does that leave me? "You should have chosen a different insurance company" isn't very comforting.

Do you know what derivatives are? Are you familiar with Swaps, Options, Futures? For the most part, they are used as a hedging strategy. They act as a form of "insurance" on investments to off-set or mitigate some potential risks.

Derivatives are all based on, or derived from, an underlying value. I'll grant you that some of them have been less than spectacular. I've used currency swaps to hedge against dollar drops. Not all of them are infinitesimally complex. The term 'Derivatives' covers a very wide and pliable market.

Not to stoke your fires, but you should pick up a book called "FIASCO" by Frank Partno, a former derivatives guy. If memory serves, his predictions on the Japanese market crashing were wrong. But it's a fun and fast read that covers many of the dumb things financial services companies have done. I think this would just add more fuel to your fire even if I don't agree with you. If anything, it is a decent primer to understanding derivatives for the non financial folks.

Thanks for the recommend on the book. I'll look for it. I can't really disagree with any of your points, especially the dates you listed.

Posted by: Methinks

Wow, well it's too bad all these major investment firms didn't consult with you because you apparently could have saved their collective asses and the rest of the worlds as well. Superwoman why didn't you jump into a near by phone booth and save the rest of the world with your great intelligence of the price of pieces of paper before it collapsed in on itself?

As each day goes by and more and more economic laureates and esteemed others confirm the danger of these financial cowboys and their toxic products it is you who looks like a blithering idiot trying to defend the indefensible….. maybe we should start with your early childhood. Was it a hard time for you? Tell me what happened way back then when you were a wee little girl….

In modern Constitution Day discussions? Does anyone actually have those? I'd say that perhaps history professors and libertarians might discuss these arguments, but the average citizen doesn't know what an anti-Federalist is. Heck, the average citizen has never read the Constitution and doesn't care about Constitution Day.

brotio,

A few things… First, I recommend Randy Barnett's book "Restoring the Lost Constitution". We were well on our way to eviscerating the controls against the growth of government within the Constitution long before the 16th and 17th Amendment.

Second, Madison's original plan called for the Senate to be popularly elected and apportioned by population just like the House, and I'm sure Hamilton would have taken any revenue-raising method he could get his hands on, so I doubt he would have balked at an income tax.

Third, I do agree that the 16th and 17th Amendment accelerated the growth of government. The Constitution itself was a departure from the spirit of the Revolution, and we've been accelerating away from small government ever since 1787. The 17th Amendment was a big part of that (by removing the State Legislatures check on federal power), and withholding plus the 16th Amendment gave them the funding to make use of that power.

Last, let's go one step farther. Being an economics blog, I'd say 1913, 1933, and 1971 were all watershed dates in the growth of government, as all signified departures from sound money.

I do, Muirdiot. Your inability to wrap your mind around the simplest of calculations doesn't prevent other people with a modicum of intelligence from figuring out the value of things. Your childish habit of wanting destroy everything and anything you don't understand (which is pretty everything) simply because you can't comprehend it is not a convincing argument for anything but sending you to the naughty chair until you learn to behave.

Brad,
How much importance do you give to the Sixteenth and Seventeenth Amendments for the creation of our Federal leviathan? I know that doesn't negate your argument, because the framers made the document amendable, but it seems to me that the Federal Gummint was fairly unobtrusive before the two Evils were ratified.

Ken,
Don't find it so hard to believe.