This is a great video about credit derivatives. It points out that these credit default swaps and other derivatives are tantamount to gambling.
That’s right. Taxpayers are basically paying off Wall Street’s gambling debts.
Tags: credit default swaps, credit derivatives, gambling, gambling debts, video financial crisis, Wall-StreetTaking finances personally
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11 opinions for Credit Derivatives: Gambling and Bringing Down Wall Street
Miki
Oct 28, 2008 at 1:15 pm
Well, duh. Who woulda thunk that all those great folks on Wall Street wouldn’t play by the rules once they’d been removed. Surprise, surprise.
miranda
Oct 28, 2008 at 1:18 pm
Heh, heh. Yeah. What I love is that many of the “experts” are so surprised about this. Common sense says that complex and opaque investments based on debt would eventually collapse.
Miki
Oct 28, 2008 at 1:39 pm
Right on, Miranda. Common sense also says that people will do whatever they can to maximize their personal financial situation as much as possible.
miranda
Oct 28, 2008 at 1:40 pm
And, unfortunately, they make irrational short-term decisions that mess the long-term…
Miki
Oct 28, 2008 at 1:42 pm
What long term? Long-term isn’t in the American lexicon:)
Miki
Oct 28, 2008 at 2:02 pm
I view the bailout in much the same light as cleaning up after a party where people drank too much and got sick on the furniture—you really don’t have a lot of choice. You can’t leave the mess because the furniture will rot and stink.
Regarding the personal responsibility issue, check out my comment in response to Wes Ball’s post today at Leadership Turn.
miranda
Oct 28, 2008 at 2:05 pm
Very apt analogy.
Jean Murray
Nov 5, 2008 at 8:39 pm
My son worked with derivatives in a large insurance company for about 4 years. He kept trying to explain them to me and I could not figure them out. Me, with a PhD in business/management. I’m not saying I’m so brilliant, just that they are difficult to understand. Big shell game, I concluded. I was right. He changed jobs, thank goodness, before all of this mess hit. The bottom line: If you don’t understand it, don’t get involved with it.
miranda
Nov 5, 2008 at 9:07 pm
Excellent point, Jean! If you don’t understand it, stay away. Especially when you are staking a large portion of your financial future on it.
Miki
Nov 5, 2008 at 9:26 pm
Haha, Jean, that is so funny! I read an article that said that the “experts” on Wall Street didn’t really understand the derivatives and offered the same warning as you and Miranda. Maybe Washington should make understanding what you invest in a law applicable to business and individuals:)
miranda
Nov 5, 2008 at 9:27 pm
:D Unfortunately, most people are at the mercy of brokers and their retirement accounts at the mercy of fund managers. It’s important, I think, to learn as much as you can — especially about finances.
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