The Great Depression. Another Great Depression?

[Augustine2004]

The BLS said unemployment dropped from 9.0 to 8.6%. But the percentage of Americans who have a job fell to 64%. How come the BLS counted fewer Americans who are looking for a job?

[seanD]

The BLS said unemployment dropped from 9.0 to 8.6%. But the percentage of Americans who have a job fell to 64%. How come the BLS counted fewer Americans who are looking for a job?

The "drop" merely represents those who drop out of the workforce, meaning they stopped looking for work, not that they found work. Anybody knows in their right mind that a drop like that was pure bull.

[little_monkey]

Nonsense. For one thing many banks did go under IIRC about 190 so far this year. Last year was also that bad. As for all the 'too big to fail' banks, what if they all entered bankruptcy court?

The top ten banks in the US, more than 80% of the market, and none went bankrupt. So I have no idea of your 190 banks going under, and even if that number is true, it represents a tiny fraction of the banking system.

Bankruptcy merely means new, different owners, as Joel notes. Many people do suffer from bankruptcies, but that would have happened in any case to that group or some other group.

You don't understand the concept. If your local laundry shop goes bankrupt, it affects the owners and the creditors. But when the whole banking system is paralyzed as in September 2008, the whole of civilization is affected. It's like comparing a cut to your finger to a cut to your main heart artery. There are simply not on the same scale.

Maybe the recession would have suffered a rather vicious drop, but it should be brief, as the Panic of 1819 was.

You're comparing 1819 to 2011??? That is so hilarious. Yep, in 1819, they had no Feds, each bank printed their own receipt (money) and no one had computers. Today billion of transactions are done EVERY SINGLE DAY. Please, you are 200 years behind the times. Get a bloody education and get up to speed.

Maybe then we'll have a decent conversation. You are a total waste.

Have a nice life.

[joel]

I agree that the technicality of the bailout was a secret. But then so what?

The amount ($16T) and the recipients are a technicality?
Do you trust implicitly the Fed to secretly (and unaccountable) to privilege whomever they want as much as they want (at the expense of others)? Seriously?

I would agree with your assessment that in a bankrupcy, wealth means a change of owners of assets. But in the case of banks we are dealing with the life blood of the financial system, and here what would apply to a bankrupcy of a tool manufacturer or the bankrupcy of of your local laundry shop won't apply to the bankrupcy of banks. A few banks going brankrupt, assuming they are not that big, won't damage the economy, but when the biggests banks are in trouble, then the effects go way beyond just the banks themselves. What was happening in September 2008 was like combining a tsunami, a hurricane and an earthquake of 9.0, all at the same time. If you think we are going through some rough patches right now, that would be a footnote had the banks gone under. The Depression of the 1930's would have paled in comparison.

The only unique thing about it is that banking is directly related to all businesses, while the tool manufacturer directly affects only those who use the tool (and their suppliers). But that doesn't change the reasoning that bankruptcies don't mean disaster (i.e., to the banking industry). If a bank goes bankrupt, its assets get handed over to the creditors (perhaps mostly other banks), thus strengthening their positions, thus strengthening the soundness of the banking industry (and depositors).

Yes, it affects more businesses/people, but that does not change the fact that bankruptcy is non-destructive and is the best way to help needed market corrections take place, thus improving the effectiveness of production and the markets.

1) Capitalism, left unchecked, leads to monopoly, and political power to an oligarchy. History has shown this, time and time again.

Not true.
Monopolies are (nearly) always the creation of the state. Monopoly (and cartels) in an unhampered market are inherently unstable and thus nearly impossible to achieve and certainly impossible to maintain.
Extreme concentration of wealth is also nearly always the result of state privilege, not unhampered markets.

That is what we see in history. People like to point to the East India Companies. These were monopoly grants given by their governments. People like to point to utility companies. However, utilities were competitive before local governments began to grant and enforce monopolies (or seize control of production themselves).

People especially like to point to the large number of mergers right around 1900. What really happened is that massive government subsidy & privilege in the Civil War created some extremely concentrated wealth (especially J. P. Morgan). But after the war, competition increased, threatening the economic position of these new big businessmen. They tried everything they could in the voluntary sector to retain their position, they tried forming cartels, and around 1900 there was a craze of mergers (and trusts). But these attempts failed and the craze declined sharply (before government intervened). On the contrary, competition was exploding, further threatening the big businessmen. Finally, after having exhausted all attempts in the voluntary sector, they turned to their only remaining option: getting the government to protect their economic position, through regulating their competition, enforcing cartels and monopolies, granting subsidies, etc. The result of this is the modern regulatory state, without which the rapidly growing competition would have broken up the concentrated wealth.

Banking is an especially good example of this. There is perhaps no industry so government-privileged. Thus bankers are the very richest of the rich. If we had a freed market, we would see competition grow and bank profits would decline to that of profits elsewhere.

2) Campaign finance reform has been attempted many times, and never succeeded,

Agreed. Campaign finance reform has usually been counterproductive, helping those with wealth and power and hurting the little guy. I favor reducing government power, thus reducing the incentive to abuse it. Corrupt people will always gain control, Attempts at campaign finance reform can only result in infringement of free speech or other liberty.

The reason I brought up these donors is to point out that it is a myth that bankers want laissez-faire. If they did, they would support laissez-faire. Instead they donate to campaign for fascists like Obama, Bush, Romney, etc. Bankers created the existing state of banking laws. They unjustly benefit from them.

[Augustine2004]

The top ten banks in the US, more than 80% of the market, and none went bankrupt. So I have no idea of your 190 banks going under, and even if that number is true, it represents a tiny fraction of the banking system.

You seem not to understand counterfactual arguments.

You don't understand the concept. If your local laundry shop goes bankrupt, it affects the owners and the creditors. But when the whole banking system is paralyzed as in September 2008, the whole of civilization is affected. It's like comparing a cut to your finger to a cut to your main heart artery. There are simply not on the same scale.

Not to the same scale, true. But you can't point to the 'heart' of the economy. Essentially it's just many trades. E.g., you buy a loaf of bread from a baker.

[joel]

One might turn little_monkey's size argument in the other direction: because the banking industry is so big and affects everything, it is all the more important to let needed market corrections in it occur. Interfering with this process is all the more destructive. That is, merely its size and relation to everything is not sufficient to imply that coercive intervention helps.

Both theory and history indicate that intervention only worsens and prolongs the depression (of those claiming that we'd be in a bigger disaster if it hadn't been for the intervention, I never see any of them explaining the mechanism by which this disaster would come about). If the government had not interfered in 2008 and since, it is likely that there would have been a quick crunch, eliminating unsound investments/firms, and within about a year the markets would have been back on their feet, more sound than before, and growing strong. That we are still in a depression is the result of government intervention.

[seanD]

One might turn little_monkey's size argument in the other direction: because the banking industry is so big and affects everything, it is all the more important to let needed market corrections in it occur. Interfering with this process is all the more destructive. That is, merely its size and relation to everything is not sufficient to imply that coercive intervention helps.

Both theory and history indicate that intervention only worsens and prolongs the depression (of those claiming that we'd be in a bigger disaster if it hadn't been for the intervention, I never see any of them explaining the mechanism by which this disaster would come about). If the government had not interfered in 2008 and since, it is likely that there would have been a quick crunch, eliminating unsound investments/firms, and within about a year the markets would have been back on their feet, more sound than before, and growing strong. That we are still in a depression is the result of government intervention.

I explained to you before in another thread that the mechanism for a chain reaction disaster is the derivative market. A string of counterparties getting wiped out because they're way over-leveraged and can't cover their liability contracts. But I agree with you that 2008 was the crash that should have been allowed to happen. It was necessary to both allow the system to purge itself and to prevent a moral hazard -- to send a message to the big hedge fun managers that government wasn't going to insure their losses and cover their recklessness. Now we've created a systemic monster we can't control. I think Hank Paulson, Secretary of Treasury at the time, definitely used exaggeration of an economic disaster in order to extort funds from the House and to get this whole bailout ideology going. Whether Paulson was sincere or not is hard to say, but now that it has become public that Paulson engaged in insider trading in private meetings he had with hedge fun managers, his sincerity is doubtful. But this also shows how corrupt the system has become, being that Paulson was also a CEO of Goldman Sachs prior to his government position. IOW, the circumstances show us that intervention is a result of corruption, not just unsound economic policy.

[joel]

I explained to you before in another thread that the mechanism for a chain reaction disaster is the derivative market. A string of counterparties getting wiped out because they're way over-leveraged and can't cover their liability contracts.

But a string of such bankruptcies is not a chain reaction of destruction. It would imply that the destruction of wealth had already taken place and that there was is no real wealth to destroy.

If a firm goes bankrupt and has no assets to give to the creditor, the bankruptcy doesn't hurt the creditors, since there already is no assets there. If this causes the creditor to go bankrupt, that's because the creditor was already insolvent and should also go bankrupt. This too does not destroy wealth.

The myth is that there is some chain reaction that would take down sound firms as well, or that would destroy real wealth. I see no reason to think so.

IOW, the circumstances show us that intervention is a result of corruption, not just unsound economic policy.

Yep, "too big to fail" was a myth invented to create support (through fear) for this corrupt policy.

[seanD]

But a string of such bankruptcies is not a chain reaction of destruction. It would imply that the destruction of wealth had already taken place and that there was is no real wealth to destroy.

If a firm goes bankrupt and has no assets to give to the creditor, the bankruptcy doesn't hurt the creditors, since there already is no assets there. If this causes the creditor to go bankrupt, that's because the creditor was already insolvent and should also go bankrupt. This too does not destroy wealth.

The myth is that there is some chain reaction that would take down sound firms as well, or that would destroy real wealth. I see no reason to think so.

Yep, "too big to fail" was a myth invented to create support (through fear) for this corrupt policy.

I hate to go into these long outlines because I know you’re going to ruin my main point by breaking up my post (*sigh*). But the first problem is that we have no way of knowing the magnitude of the derivative market. We just know that the liability would be really really bad based on the fact that it has ballooned to anywhere between $600-1.5 quadrillion dollars. But to get to your point. Yes, large firms are insolvent. The only think keeping them sustained is the illusion of assets that are valued way beyond what they’re actually worth. Hence, a bubble. So we’re talking pure psychology here. No, we’re not destroying wealth, but we’re destroying the illusion of wealth (I"m not arguing that this is a bad thing, just pointing out why this would be disastrous). Western economies are floating on this illusion. Since these big firms are leveraged 20, 50, 100 to 1, the markets themselves are greatly overvalued based on that illusion of wealth, which means we would have to expect the markets to sink anywhere from 50-90% of where they are now once we burst that bubble. When you allow the chain of failing firms to take affect (all joined at the hip with counterparty liability contracts), their overvalued assets are exposed, thus the illusion is exposed, which drives market psychology from positive to negative and this crashes the markets even more than the deflating asset bubble (both by investors pulling out their investments and/or bank runs). When there’s a market crash that severe, this obviously affects sound and solvent companies and investors that are riding on that illusion because they too are heavily invested in the same inflated markets.

[joel]

I hate to go into these long outlines because I know you’re going to ruin my main point by breaking up my post (*sigh*). But the first problem is that we have no way of knowing the magnitude of the derivative market. We just know that the liability would be really really bad based on the fact that it has ballooned to anywhere between $600-1.5 quadrillion dollars. But to get to your point. Yes, large firms are insolvent. The only think keeping them sustained is the illusion of assets that are valued way beyond what they’re actually worth. Hence, a bubble. So we’re talking pure psychology here. No, we’re not destroying wealth, but we’re destroying the illusion of wealth (I"m not arguing that this is a bad thing, just pointing out why this would be disastrous). Western economies are floating on this illusion. Since these big firms are leveraged 20, 50, 100 to 1, the markets themselves are greatly overvalued based on that illusion of wealth, which means we would have to expect the markets to sink anywhere from 50-90% of where they are now once we burst that bubble. When you allow the chain of failing firms to take affect (all joined at the hip with counterparty liability contracts), their overvalued assets are exposed, thus the illusion is exposed, which drives market psychology from positive to negative and this crashes the markets even more than the deflating asset bubble (both by investors pulling out their investments and/or bank runs). When there’s a market crash that severe, this obviously affects sound and solvent companies and investors that are riding on that illusion because they too are heavily invested in the same inflated markets.

Hah, I'm not sure why you are so annoyed by people putting their comments next to the part of the post to which it refers. I'll indulge you this time, so you'll just have to guess which parts of your post each of my comments refers to.

I don't think it is disastrous to replace an illusion with knowledge of the truth. It can only improve things.
(Though of course some people may be shocked to learn the truth.)

I don't agree that "psychology" (Keynes' "animal spirits") is a big factor. Bubbles are not created by "animal spirits" but by the "illusion", by market signals (especially the rate of interest) being distorted that would have otherwise provided important knowledge regarding how to act economically. The errors are due to people acting on bad information. Otherwise errors are spotted as opportunities to profit for others who correct them, so they are not self-perpetuating.

Bank runs do not cause contraction "even more than the bubble". Rather, the fractional reserve bank contains a bubble. The bank run only contracts that bubble. Fractional reserve banks are already insolvent by definition.

And to the extent that a "sound" firm X is "heavily invested" in an unsound firm Y, then X is not sound.
Like I said, for example, if Y goes bankrupt and its assets are to be handed over to its creditor X, but Y has no assets, then X's asset in Y was already worthless. The only thing it "destroys" is X's false belief that it was "heavily invested" in Y, by X learning that it actually has no wealth in Y. If this makes X realise that X is unsound, then X was already unsound to begin with. The bankruptcy did not cause X to become unsound.

While on the other hand, if X is still sound without Y, then Y's going bankrupt again did not make X unsound.

We could also consider the extreme case where every individual firm is unsound. The result would be every firm changing owners, lots of liabilities being wiped out, probably every line of production undergoing needed reorganizations, and production continuing, sounder/stronger than ever.

[seanD]

Hah, I'm not sure why you are so annoyed by people putting their comments next to the part of the post to which it refers. I'll indulge you this time, so you'll just have to guess which parts of your post each of my comments refers to.

I don't think it is disastrous to replace an illusion with knowledge of the truth. It can only improve things.
(Though of course some people may be shocked to learn the truth.)

I don't agree that "psychology" (Keynes' "animal spirits") is a big factor. Bubbles are not created by "animal spirits" but by the "illusion", by market signals (especially the rate of interest) being distorted that would have otherwise provided important knowledge regarding how to act economically. The errors are due to people acting on bad information. Otherwise errors are spotted as opportunities to profit for others who correct them, so they are not self-perpetuating.

Bank runs do not cause contraction "even more than the bubble". Rather, the fractional reserve bank contains a bubble. The bank run only contracts that bubble. Fractional reserve banks are already insolvent by definition.

And to the extent that a "sound" firm X is "heavily invested" in an unsound firm Y, then X is not sound.
Like I said, for example, if Y goes bankrupt and its assets are to be handed over to its creditor X, but Y has no assets, then X's asset in Y was already worthless. The only thing it "destroys" is X's false belief that it was "heavily invested" in Y, by X learning that it actually has no wealth in Y. If this makes X realise that X is unsound, then X was already unsound to begin with. The bankruptcy did not cause X to become unsound.

While on the other hand, if X is still sound without Y, then Y's going bankrupt again did not make X unsound.

We could also consider the extreme case where every individual firm is unsound. The result would be every firm changing owners, lots of liabilities being wiped out, probably every line of production undergoing needed reorganizations, and production continuing, sounder/stronger than ever.

I'm going to admit, I had a real hard time deciphering your post. I don't know if you either don't see the big picture and you're instead looking at everything as an separate scenario, or if you're just talking way over my head. The volatility of market psychology right now is demonstrated by how violently it has moved up and down in the course of just this year alone based on any bit of news that comes along. If there's bad news about the EU, Dow sinks 200 points. If Obama farts and it sounds like good news of a strong economy, the stocks soar 200 points the next day. Just over a few months ago the Dow was down 2,000 points from where it is now. The Flash Crash of 2010 lost 1,000 points in just a matter of minutes. This is not normal activity.

And derivative investments don't work like how you think they work. Derivatives are not companies; they’re security contracts. They insure the value of an asset. When people lost their retirement and pensions because Bear Sterns and Lehman Bros. went down, that doesn’t mean they were directly invested in these firms even though the events of Lehman Bros. affected the outcome of their investments. There are no creditors in this case. If X insures the failure of Y, this doesn't mean X is directly involved with Y. Through a derivative, X is merely insuring Z that Y won't fail, and if they do, the contract states that X will cover the losses of Z for the failure of Y. And since Y is overvalued at 50 billion, X doesn’t have the capital to cover the potential loss of assets, so they make a contract with firm B to cover the contract between X and Z. B then gets three more counterparties, C, D and E, and on and on… thus is how the $600-1.5 quadrillion derivative spiderweb multiplies.

[Augustine2004]

Calls and puts are derivatives?

[seanD]

Futures, options, swaps, etc.

[joel]

I'm going to admit, I had a real hard time deciphering your post. I don't know if you either don't see the big picture and you're instead looking at everything as an separate scenario, or if you're just talking way over my head. The volatility of market psychology right now is demonstrated by how violently it has moved up and down in the course of just this year alone based on any bit of news that comes along. If there's bad news about the EU, Dow sinks 200 points. If Obama farts and it sounds like good news of a strong economy, the stocks soar 200 points the next day. Just over a few months ago the Dow was down 2,000 points from where it is now. The Flash Crash of 2010 lost 1,000 points in just a matter of minutes. This is not normal activity.

I'd say that this likely has to do with the uncertainty and misinformation due to distorted market signals and regeme uncertainty. When there is more uncertainty then people's judgements will vary more (and be based more on "psychology").

And derivative investments don't work like how you think they work. Derivatives are not companies; they’re security contracts. They insure the value of an asset. When people lost their retirement and pensions because Bear Sterns and Lehman Bros. went down, that doesn’t mean they were directly invested in these firms even though the events of Lehman Bros. affected the outcome of their investments. There are no creditors in this case. If X insures the failure of Y, this doesn't mean X is directly involved with Y. Through a derivative, X is merely insuring Z that Y won't fail, and if they do, the contract states that X will cover the losses of Z for the failure of Y. And since Y is overvalued at 50 billion, X doesn’t have the capital to cover the potential loss of assets, so they make a contract with firm B to cover the contract between X and Z. B then gets three more counterparties, C, D and E, and on and on… thus is how the $600-1.5 quadrillion derivative spiderweb multiplies.

I understand the idea (e.g., of credit-default swaps).

When I said "creditor" it can be expanded to include any case of someone owing payment to someone else, such as how (in your example) X owes Z if Y fails. Z essentially purchased a "contingent bond" from X, similar to how it purchased a regular bond from Y.

So the solvency of Z depends on the solvency of X and Y (instead of just Y). Z has reduced his risk in the sense that he faces disaster only if X and Y both fail. Now, suppose that X and Y are unsound and need to go bankrupt. Will their bankruptcy make Z unsound? No, because X and Y have already failed. The disaster has already happened. Bankruptcy just makes the best of the disaster that has already happened. At this point, their bankruptcy can only make Z sounder, by transferring assets to Z. Their bankruptcy cannot make Z less sound.

The fear is that their bankruptcy would make Z less sound, making it go bankrupt which would make it's creditors less sound and go bankrupt, in a chain reaction, making sound firms unsound, pulling everything down. But the bankruptcy does not make the creditors less sound; it can only make them more sound. Thus any chain reaction would only reveal and take down "unsoundness", which would only make everything sounder.


On a related note:
In addition to "too big to fail" being a falsehood, it is also misleading in the sense that when we are asking whether to bail out, the firm has already failed. At that point the question of whether it is "too big" for us to let it fail creates the false impression that it's failure hasn't yet happened and that it can be prevented. Rather, the only question remaining is what to do now that it has failed. Should you go forward with bankruptcy, transferring assets to creditors, thus shoring up the other firms. Or should you steal money from sound persons and firms (perhaps making them unsound) and pour it down the sinkhole of this failed/unsound business model?


And as for derivatives in general. There is nothing inherently wrong with them. They are a useful tool for improving the market for (and thus allocation of) risk. Their complexity too is not the problem. The problem, like with any other kind of asset, is when a bubble is created through an artificial expansion of credit, especially when the government is heavily subsidizing risk, causing risk to be priced too low, which is certain to cause a disaster in the market for risk.

[seanD]

I'd say that this likely has to do with the uncertainty and misinformation due to distorted market signals and regeme uncertainty. When there is more uncertainty then people's judgements will vary more (and be based more on "psychology").

I understand the idea (e.g., of credit-default swaps).

When I said "creditor" it can be expanded to include any case of someone owing payment to someone else, such as how (in your example) X owes Z if Y fails. Z essentially purchased a "contingent bond" from X, similar to how it purchased a regular bond from Y.

So the solvency of Z depends on the solvency of X and Y (instead of just Y). Z has reduced his risk in the sense that he faces disaster only if X and Y both fail. Now, suppose that X and Y are unsound and need to go bankrupt. Will their bankruptcy make Z unsound? No, because X and Y have already failed. The disaster has already happened. Bankruptcy just makes the best of the disaster that has already happened. At this point, their bankruptcy can only make Z sounder, by transferring assets to Z. Their bankruptcy cannot make Z less sound.

The fear is that their bankruptcy would make Z less sound, making it go bankrupt which would make it's creditors less sound and go bankrupt, in a chain reaction, making sound firms unsound, pulling everything down. But the bankruptcy does not make the creditors less sound; it can only make them more sound. Thus any chain reaction would only reveal and take down "unsoundness", which would only make everything sounder.


On a related note:
In addition to "too big to fail" being a falsehood, it is also misleading in the sense that when we are asking whether to bail out, the firm has already failed. At that point the question of whether it is "too big" for us to let it fail creates the false impression that it's failure hasn't yet happened and that it can be prevented. Rather, the only question remaining is what to do now that it has failed. Should you go forward with bankruptcy, transferring assets to creditors, thus shoring up the other firms. Or should you steal money from sound persons and firms (perhaps making them unsound) and pour it down the sinkhole of this failed/unsound business model?


And as for derivatives in general. There is nothing inherently wrong with them. They are a useful tool for improving the market for (and thus allocation of) risk. Their complexity too is not the problem. The problem, like with any other kind of asset, is when a bubble is created through an artificial expansion of credit, especially when the government is heavily subsidizing risk, causing risk to be priced too low, which is certain to cause a disaster in the market for risk.

You’re basing this on a theoretical premise (again with the theories) that the system involves players who are of sound mind. But with what we’ve seen over the last decade, “sound investments” are not at all the case here. Perhaps Z hasn’t only invested in Y, but he’s overleveraged his investment in Y in order to get the maximum return possible. This is not just a possibility, but with what we’ve seen, a probability. He’s essentially gambling with capital he doesn’t have. In that case, if Y goes down, in a normal situation the assets would transfer to the creditor, which is Z. But these situations are not normal. Since X can’t cover the losses incurred as a result, then X, Y and Z are all toast because Z was overleveraged themselves. Take the example of MF Global. Corzine raided the accounts of his clients and used their funds to gamble with European bonds. He leveraged them 40 to 1, which meant that if EU bonds rose, he’d make a killing, but if they dropped even a little, MFG would be wiped out. Well EU bonds dropped just 10%, which wiped out all the capital in Corzine’s firm. IOW, he was gambling with capital he didn’t have because he was overleveraged. In the scenario above, had Corzine bought protection from X and Y on that investment (amazing that he didn’t, or perhaps he was over his head and couldn’t afford it), those firms would have been wiped out as well. So in this hypothetical, we have bankrupt firms with no creditor to take over the assets, because the firms were in over their head in EU bond investments. You don’t think this type of behavior is rampant and systemic? The derivative market has exploded to $600+ trillion after Glass Steagall was repealed. Of course it is. What do you think would happen to that $600+ trillion market if something major happened like the collapse of the EU? BofA tried to move $70 trillion worth of derivatives from Merrill Lynch into an FDIC account so that the liability would fall on the heads of the tax payers. $70 trillion. Does that sound like folks who are of sound mind? Bernanke states that he will commit tax payer funds in the form of derivatives (currency swaps) to save all the banks of Europe if need be, in spite of the fact that the US is in a debt hole that is mathematically impossible to get out of. Does that sound like a man who is of sound mind? This type of insane behavior has become systemic with people who are driven by insatiable greed and recklessness, thus we don’t expect your theories to be correct because we know that the investment situation is not under normal circumstances. We’re dealing with people who are not acting with a sound mind.

I’m not defending this strategy of sinking public funds into failed models. I’m just pointing out why the fear of something really bad is not unjustified. But allowing it to go on in 2008 was definitely the greater of evils in spite of the consequences of letting the collapse take its course. But I also believe (based on what I've observed) that federal crooks like Paulson, Geithner and Bernanke aren’t exploiting the fear because they’re genuinely concerned about the greater good, but because they’re acting in the best interest of the banking cabal. In that sense “too big to fail” is a fraud because I believe it’s being used for fraudulent motives. This cabal profits much more and gains unmitigated power by preventing a collapse and keeping an overleveraged bubble system going.

I also agree that derivatives are fine, but it’s the people behind the derivatives. It’s like a vehicle or a gun. These instruments can be very beneficial, but if these instruments are in the hands of psychopaths, they can be “weapons of mass destruction.”