we can all be millionaires

in response to a commenter who complained that krugmans desire for more regulation will snuf out productive innovative financial products

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yes i too would like to hear from LondonYoung or prof Hsu or any other person in defense of goldman about the observation LondonYoung made at the end of his comment speculating that the regulation krugman advocates might impair or halt "economically productive trading"

how about an explanation for just two of these "economically productive trading" schemes which i believe amount to nothing more than a casino model of modern finance

first question, how can a derivative market that dwarfs the volume and value of the real, underlying, market be justified?

whether it is gold, soybeans, oil or mortgage backed securities, when those who neither produce, nor process, nor market nor consume a commodity or product are able to deal contracts, sometimes buying and selling in seconds or less volumes many times the "real" market and then bubble, or crash a market... yes...do tell me... where is the economically productive trading

number two is the credit default swap, the so called insurance...not

since when can a person buy or sell insurance when they have NO insurable interest it would be like me buying an insurance policy on professor hsu's house from LondonYoung when niether of us live there, pay rent, make mortgage payments or have any identifiable fiduciary interest

but that is just what happened...financial concerns were able to place bets (buy fire insurance) on securities they did not own, taking out insurance policies (credit defualt swaps,CDS), from other financial concerns , who , it came to pass did not have the ability to pay in the case of a "fire"

the so called innovation was a dangerous numbers game invented by very smart people, and marketed by very aggressive alpha male CEO types who thought they had it all figured out

well, they didnt and the system is seriously messed up

thanks to people who thought they could play games with debt, leverage, and derivatives

why to hear some talk of it, we could all quite our day jobs and just make a living off of day trading...why we could all be millionaires, right?

this what krugman and others are decrying...the banking oligarchs have levied a tax upon the productive society...they demand a lions share of goods and services by way of their exorbitant compensation while doing less and less of real value

we are in this financial crisis because the richest most powerful financial firms played fast and loose with our financial system

the very crux of the point is that the goldman sachs of the world..and goldman is far from alone...mis-allocated capital to non productive, highly leveraged, very risky "investments" and their bets didnt pay off so now they enjoy government bailouts but refuse regulation

so again i ask those who embrace the apologia of goldman to justify the explosive growth in notional amounts of derivatives and exotic securitizations

and when you get that number, which is in the hundreds of trillions, a factor many times the worlds GDP, then tell me in an approximate dollar amount the value these geniuses have visited upon our society with their "innovations"

btw dont tell me about how the notional values all work out to zero and so theres no harm...the fees and salaries paid to originate these deals are huge, i.e. these guys get big bonuses

and if the notional value didnt matter then the way out of the crisis isnt to unwind all these securities etc, rather, the government could just decree that all derivatives are worth zero and all premiums are halted

that aint gonna happen