In 2000, a united financial services industry persuaded Congress to allow a vast, unregulated market in derivatives, which are contracts in which investors essentially bet on the future price of a stock, commodity, mortgage-backed security or other thing of value.
Derivatives ”” so named because their value derives from something else ”” also are known as hedges, swaps and futures. They are designed to lower risks for buyers and sellers, but in some cases, economists now say, they gave investors a false sense of security.
Today, derivatives are compounding the risks to a shaky economy because they are tied to complex mortgage securities that have plummeted in value. Instruments called credit default swaps, for example, were supposed to insure investors against default of mortgage-backed securities. With a mass collapse of those bonds, it’s not clear how the swaps can pay off….
“In 2000, a united financial services industry persuaded Congress to allow a vast, unregulated market in derivatives”
We had a “vast, unregulated market in derivatives” well before 2000. The 2000 legislation precluded the Commodity Futures Trading Commission from beginning to regulate over-the-counter derivative contracts (i.e., those not traded on an exchange).
Where your treasure is, there will your heart be also…seems we have a lot of posters here who in a spiritual soup…
A wise man once said to me that you must realize that you can lose your money in the stockmarket as well as win gains in it. If you can’t afford to lose in the market you shouldn’t be in there!!