As an investment banker on Wall St for an entire career (I was a senior banker in what was called a "creative shop"), I saw instruments created (including derivatives) that helped borrowers and those seeking investment capital more precisely and more accurately and, yes, less expensively, define their means of raising capital.
I saw instruments created that either attracted new lenders or investors to previous inactive markets because of their precision in meeting the needs of such lenders and investors.
Also, I have seen instruments created that let farmers and corporations hedge against certain kinds of risk that had plagued their types of operations since the beginning of time.
I have seen specialized funds created that made capital available to certain difficult to understand kinds of companies/operations/ventures and made pure specialty investment opportunities available to investors with specific and specialized knowledge of very narrow fields of endeavor.
I have seen venture capital endeavors come to life because at long last an instrument was created that helped investors overcome their aversion to certain elements of risk (or bypass that risk altogether).
Though I have been retired for quite a while now, I am certain that some of the recent derivatives were monumentally wasteful and ineffective.
For the most part, I developed products for institutional and high net worth investors in the private placement market and our rule of thumb was to always make sure the investor understands the product. That said, to any investor, whether individual or institutional, the same old rule applies..."caveat emptor!"
IMO, the biggest problem is over-leverage. Dubya allowed Wall Street firms to employ leverage of 40-1, where a paper loss of 2.5% wipes out your equity, even if only temporarily.
What say you about the potential repeal of Glass-Steagall?
I have seen the wise guys on Wall Street blow up themselves and this economy and get on the welfare line with taxpayers and the Fed bailing out these turds. The Fed now has on its books most of the toxic assets these turds created. Same thing happened in some European nations
Sure you saw some good things and good ways to hedge against risk
Sure you described simple futures contracts which I have no problem with
But blinders on, you have ignored how much damage Wall Street has done. It it were up to me I would ban most derivatives. The complainers can go trade them in Dubai or London for all I care
Or I would mandate that all derivatives are traded publicly on a transparent market I can see on the internet like the futures markets
This Wall Street mischief is same as the concocted global warming and the scientists behind it. I don’t trust them and I don’t trust Wall Street. They both cook up a trashy product that requires billions and trillions in spending and wealth transfers and abilouts
Like Volcker said— We got along just fine without swaps and derivatives