State of the Art :: Derivatives
Re-Framed by Pat Darnell | Jan 15, 2012 | Bryan TX
Today while the TEXANS cogitate in the locker room during half time of their playoff game at Baltimore... I am decidedly anxious to find the root of a certain terminology that has been vastly abused: Derivatives.
Last week I re-watched a 2009 documentary -- "Capitalism: A Love Story" -- produced by Michael Moore. At one point Moore asks people going in a out of the CHASE bank building if they knew what a Derivative is. It perked me up, and soon I wanted to know what a Derivative is.
" ... His [Moore's] study of the meltdown leads him to the puzzling matter of "derivatives," the mysterious financial instruments involved in the bank collapses. In the film, Moore asks three "experts" to explain a derivative to him. They can't. (Ebert, Roger. Sep 27, 2009. LINK) ... "
-- [Half-Time is over; second half, TEXANS still losing] --
A Google search of Moore, Michael, derivatives, movie ... produced a few interesting explanatory bits; but nothing to placate my uneasiness about this subject.
One blogger (Powell, Tom. Oct 7, 2009. LINK) said about the derivatives gamblers "... Eventually, the government stepped in to save them by creating a bailout package that was funded by tax payers from states where gambling is prohibited. ... "
Searching "Clinton, derivatives," ... (Zumbrun, Joshua. April 18, 2010. LINK) " ... Former President Bill Clinton said his Treasury Secretaries Robert Rubin and Lawrence Summers were wrong in the advice they gave him about regulating derivatives when he was in office. ... "
EXCERPT | " ... Their argument was that derivatives didn’t need transparency because they were “expensive and sophisticated and only a handful of people will buy them and they don’t need any extra protection,” Clinton said. “The flaw in that argument was that first of all, sometimes people with a lot of money make stupid decisions and make it without transparency.”At the Article " ... Summers, director of Obama’s National Economic Council, said in a Bloomberg Television interview last week that the Obama administration supports “the principles that derivatives need to be traded in the sunshine, that there needs to be centralized clearing.” (ibid.)... "
“Even if less than 1 percent of the total investment community is involved in derivative exchanges, so much money was involved that if they went bad, they could affect 100 percent of the investments,” Clinton said. (Ibid. LINK) ... "
But then a small bit of enlightening information shines: there are 'standardized derivatives' and 'customized derivatives' out there, Rubin said in his "April 8 testimony before the Financial Crisis Inquiry Commission." But remember Rubin is the guy Clinton said led financial trustworthiness astray.
I remember the first derivatives I ever saw were in the appendix of a Calculus book. Is that the origin of this worldwide derision about derivatives? It depends on how well you understand, and have kept up with Calculus... ? YIKES!!!!!! No wonder nobody has a clue what they are.
Foreclosed? Advice you can use from the helpful Michael Moore :: rogerebert.com :: People: "So these derivatives are essentially bets on bets."
'via Blog this'
-- [TEXANS just made a Goal Line stand] --
Conclusion
Where do we go from here? Every large and established business has a customized derivative of its financial system. Every Institution, Government branch, and Holding Company it is the same. Some groups have standardized derivatives, that any mathematics graduate can maybe decipher.
But for the general population, you have to suck it up. Like in this drawing below: the apple is falling and can be measured in its progress using a standard velocity derivative, right?
But the ground is falling, while spinning too -- and the tree is falling and spinning with that model as well ... and while it is measureable ... your standard derivative has just become customized and infinitely complicated.
Picture LINK]
NEXT WEEK: Who wishes the American Financial System gets a Lobotomy?-- [TEXANS lose 20 to 13 ...] --
___________________Reference
http://www.hedgeco.net/blogs/2009/10/07/michael-moore-here-is-a-derivative-explanation-for-you/
http://rogerebert.suntimes.com/apps/pbcs.dll/article?AID=/20090927/PEOPLE/909279997
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