As we find our economy subsisting on massive government spending and no-strings-attached bailouts, borrowed, of course, from future generations, what solutions do the same leaders who got us into this mess offer?
You already know the answer -- more government handouts.
The latest gambit?
Politicians like Judd Gregg and Ben Nelson are fighting to keep the crooked $600 trillion derivatives market unreformed. The dirty not-so-little secret about derivatives? In their current form, they are basically government insurance where the bailed-out mega-banks get to keep the premiums but the taxpayer pays the claims.
Senator Gregg points out that good, honest American companies like Harley-Davidson and Caterpillar use these derivatives to hedge against things like currency changes and costs of materials. Hedging against price fluctuations is something that any smart business would want to do and should be encouraged.
What Senator Gregg doesn't point out is that companies can already do this WITHOUT secret derivatives. They just have to buy them on a market exchange or, if it's something unusual or exotic, go to an actual regulated insurer like Lloyd's of London. If Mariah Carey can get her legs insured, I am pretty sure that Caterpillar can find a regulated insurer to cover a seasonal drop in steel prices.
The reason no one wants to cut this scam off is because it works out great for everyone except the taxpayer/sucker who actually pays the claims. The buyers get cheap insurance backed by the US government, the banksters (the big four: JPMorgan Chase, Bank of America , Citigroup and Goldman Sachs) get to keep the premiums and WE THE TAXPAYER pay the claims -- and trust me, AIG is just the tip of the iceberg (note: Fannie + Freddie) in this ongoing derivative bailout!
Just because a few good, American companies like Berkshire Hathaway (major stockholder: Ben Nelson) like getting a sweet deal from the taxpayer doesn't mean that we should keep giving them one. This is especially true when CEOs like Warren Buffet already knew they were a deal too good to be true when they bought them. It is time for us to cut off their welfare checks.
Too many politicians in this country have decided that socialism buys votes, especially when their generation doesn't have to pay for it. But thankfully, there are politicians willing to keep our great country from falling further into this abyss and are willing to put an end to this ridiculous taxpayer giveaway.
Call or write your Senator and tell them to support real derivative reform or that they will pay the consequences come election time.
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I can buy steel on the futures market, I agree to buy it in the future for a price set today.
I can buy an unregulated derivative against a future purchase at a given price. This means that if the price goes up I get *paid* the extra cost.
The difference, the difference that counts, is that with a derivative *I don't have to buy* - I just get the money if the cost goes up (and have to pay for the derivative regardless.)
I can't speculate on a futures market because, at the end of the day, I end up with a million tons of steel that I have to find space for in my back yard (it will fit, but it really cramps my style.)
I can speculate on derivatives because I never own nothing, not at all. It's just money.
It's convenient for a large buyer to buy derivatives because a large buyer may decide not to actually buy. CAT radically ramped back their production at the end of 2008; had they bought futures, they would have had the same back-yard credibility problem I would have.
But CAT can find other ways to justify their accountants' salaries, which is why this article is correct. The problem I have is that it is so totally lacking in explanation. I guess explaining things might mean people stop believing in god, or pundits, or whatever.
The next step is to look at who made financial contributions to Sens.Gregg and Blue Dog Nelson.
In mining, banking healh insurance, everything, it is always the money.
What did Deep Throat say? Follow the money.
http://www.huffingtonpost.com/2010/04/30/fbi-investigating-fed-off_n_558544.html
http://krugman.blogs.nytimes.com/2010/03/17/demons-and-demonization/
http://www.cjr.org/the_audit/reuters_is_excellent_in_diggin.php
Big companies make big promises of big bucks, but too many promises, and too many promissory notes can mean big problems, instead, like, what happens when one of these investment trading houses can't cover their bets anymore? Well, we all know the answer to that one...
Capitalism is in favor of failure that is the way the best succeed.
2 ) Socialism: BIG business or private citizen who can afford to buy / sell govt official. When they fail, capitalism ( see # 1 ) will bail them out and decrease their risk.
The rest is irrelevant. The debt is a sideshow played up by the derivatives felons!
None of those programs were bailouts- they were always government programs, like the defense budget, subsidies to grain exporters, subsidies for R&D by universities and government institutions that benefitted private ag and pharmaceutical companies etc. Just because you don't like some government programs for the benefit of people doesn't make them illegitmate, anymore than the peace advocates who want their taxes back for what went to the Pentagon and arms manufacturers. Get over it.
I believe (and every American I have ever met-otherwise no roads, social security, VA etc) the statement below:
"Socialism is required for things that we absolutely must have, like health care, the common defense, police and firefighters, clean air and water, and so forth.
Free markets are wonderful for all the crap we can live without"
We can live without Google but we die without health care.
Capitalism can and always has existed beside Socialism. They complement each other. They both need to be balanced against each other to prevent injustices by either ideology.
That is what our two party system is supposed to be about but the corruption of our system has thrown it out of balance. Go too far to the right, we get fascism. Go too far left we get communism.
"We The People" are supposed to be in power, but we have let it be stolen from us like Jefferson, Franklin, Eisenhower and many others warned.
Corruption is not a problem in our government--it has become our system.
Until EVERYONE starts talking and blogging and marching for Campaign Reform it is useless discussing anything that might challenge the special interests.
The will of the senate is the will of the special interests.
http://change-congress.org/
http://www.fairelectionsnow.org/volunteer/petition
Fanned.
Do you contend that is a "dead on" description of what a derivative is? Is that what a call, a put, or a futures contract amounts to? Yes, derivatives were used to take positions that couldn't be closed out and that contributed to the failure of Lehman, e.g., but that's like saying a baseball bat was used to kill someone so baseball bats are inherently evil. Derivatives were misused because the wise guys' funky math told them they'd taken risk out of the equation, a delusion that came back to bite them on the ass. The fact that the banks were TBTF had nothing to do with derivatives and everything to do with excessively low interest rates and no cap on leverage. I stand by my original statement that the article is over-simplified and uses the term "derivative" too broadly.
Actually, it is government (taxpayer) funded insurance for gambling losses. No more, no less.
Naked CDS's don't appear to have any more attachment to anything in the economy than poker chips.