Nope. You are confusing bailouts (which happen even without derivatives, see GM & Chrysler) with derivatives.
Derivatives are economically neutral. Derivatives are like making a bet with a buddy. One of you will win, the other will lose, so money will flow from the loser to the winner to cover the bet.
That’s economically neutral because the “bet” merely moved money from one person to the other...no new money was created...no old money was destroyed.
Same with derivatives.
One person wins, the other person loses each derivatives bet.
Money moves between those two people, but money is neither created nor destroyed by the derivative.
So the broader economy sees the same amount of money left in it.
That’s economically neutral. Zero sum.
That means that derivatives can’t cause an economic crash.
Oh sure, derivatives can break a company...but one company’s loss is another company’s gain.
This nets out.
To the economy at large, derivatives are harmless. That’s why you can have multi-Trillions of them (and we’ve had them for years).
No I'm not, every example I gave you was based around "bailouts". I agree that minor derivative transactions doesn't mean collapse of the financial system.
What I failed to convey to you was my agreement with the author that the size of the market, lack of controls and exposure to manipulation could create a dangerous situation. Such an event might be the trigger that causes the collapse of most of the worlds financial systems. Many of which are already under a great deal of strain.
I guess I thought you realized this. I should have been more detailed in my example of AIG.
Thanks