Here is what I understand about derivatives. They are essentially bets on debt and only a fool would buy into them.
And the big five have made bets on the world’s debt in terms of multiples of what the world owes.
Good luck with that.
It is gambling with ‘other peoples money’. Too big to fail. No downside. We the people did it which resulted in Sept. 16, 2008, and they will do it again. I believe it is a designed destruction of this country.
Not necessarily. Suppose you have $1000 invested in Microsoft stock. You want to protect that money, yet you still want to keep it in the market.
So you buy a derivative from the Leaning Right Investment Corp. The derivative costs you $10. In return, I promise to pay you $500 if Microsoft drops by more than 20 points in the next year.
I am offering you a type of insurance, a "derivative". Its value is derived from the value of something else, in this case the value of Microsoft stock.
If you are a conservative investor, you might want to buy that derivative from me. But onl;y if you trust that I can actually pay you if Microsoft stock declines.
There are, of course, some derivatives that are insanely risky. But some do make sense.
I am a derivatives trader and you are ignorant about the topic. Anything else I were to say about your post would lack charity so I will end my reply now.
Derivatives are mostly cover for mortgages made to unworthy debtors.
It’s a way to sell them to the ignorant buyer.
Affirmative action in mortgages has caused numerous crashes, and will continue to do so as long as Congress advocates for them.