If X goes up, my Y goes down. It’s all fake. It’s all just shit on a server with no value. Bets on bets on bets on bets. Insanely complex at times. Similar to synthetic CDOs during housing crisis, there are derivatives of derivatives. Meaning there are series of bets based on not even the market, but on the performance of other bets. If X goes up, my Y goes down, but Joe has a derivative of that, so he also goes up or down based on what position he took.
Leverage on top of leverage on top of leverage. It’s just another way for bankers to create work and profits for themselves. It’s just numbers, but it doesn’t represent real value. It’s not a pile of coal. Or gold. Or stock. It’s all just bets. Pixie dust.
There’s no risk for the banks. Everyone involved is wealthy. Worst case their bets go bad and they get fired. Still millionaires. They don’t even give a fuck if it collapses. No one is going to jail. They will be bailed out. Worst case some banks completely fail, and then the people will get hired at other banks.
History has taught the bankers that stealing big is the best way to get away with it. If the entire system explodes, no one person is guilty. They don’t even attempt prosecutions. They just bail out their friends with taxes that will be paid by our grandchildren’s grandchildren.
The value of a derivative is derived from some other asset. The big one in 2008 was mortgage-backed securities (MBS), securities created from groups of mortgages. These "tranches" were loosely valued by the mortgages they contained, and then sold as investments. Multiple times!
That doesn't really explain derivatives. u/corrbrick gives the definition, when the value is derived from something else.
A common derivative is the short sells, where you make an investment where you buy the contract that the value of what is invested is derived on some expected future value of that same stock.
Essentially derivatives were invented to mitigate risk. You buy a security that represents a portion of a bundle of mortgages with a known failure rate. If it fails at 2% but takes in 4% you've got a good investment. On paper anyway.
Yes, that's more specific to mortgage related derivatives. There are many different types, I'm not going to pretend expertise beyond what I've mentioned though.
Watch the movie The Big Short about the 2007-08 housing burst bubble-I submit ALL the banks listed will fail, because USA Inc is floating on fiat digital dollars. 😒
Excellent point. My comment didn't really take the other types of CDOs into consideration and might be a bit out-dated. What other types of CDO bombs do we have exploding up in this right now would be a good follow-up question. Any ideas?
Ah.. I see. I knew about interest. But not the term derivatives.
Derivative is code word for bet.
If X goes up, my Y goes down. It’s all fake. It’s all just shit on a server with no value. Bets on bets on bets on bets. Insanely complex at times. Similar to synthetic CDOs during housing crisis, there are derivatives of derivatives. Meaning there are series of bets based on not even the market, but on the performance of other bets. If X goes up, my Y goes down, but Joe has a derivative of that, so he also goes up or down based on what position he took.
Leverage on top of leverage on top of leverage. It’s just another way for bankers to create work and profits for themselves. It’s just numbers, but it doesn’t represent real value. It’s not a pile of coal. Or gold. Or stock. It’s all just bets. Pixie dust.
There’s no risk for the banks. Everyone involved is wealthy. Worst case their bets go bad and they get fired. Still millionaires. They don’t even give a fuck if it collapses. No one is going to jail. They will be bailed out. Worst case some banks completely fail, and then the people will get hired at other banks.
History has taught the bankers that stealing big is the best way to get away with it. If the entire system explodes, no one person is guilty. They don’t even attempt prosecutions. They just bail out their friends with taxes that will be paid by our grandchildren’s grandchildren.
Comment I just made: Basically our usury masters creating something out of thing air with no intrinsic value, and getting idiots to buy it.
The value of a derivative is derived from some other asset. The big one in 2008 was mortgage-backed securities (MBS), securities created from groups of mortgages. These "tranches" were loosely valued by the mortgages they contained, and then sold as investments. Multiple times!
Basically our usury masters creating something out of thing air with no intrinsic value, and getting idiots to buy it.
That doesn't really explain derivatives. u/corrbrick gives the definition, when the value is derived from something else.
A common derivative is the short sells, where you make an investment where you buy the contract that the value of what is invested is derived on some expected future value of that same stock.
Essentially derivatives were invented to mitigate risk. You buy a security that represents a portion of a bundle of mortgages with a known failure rate. If it fails at 2% but takes in 4% you've got a good investment. On paper anyway.
Yes, that's more specific to mortgage related derivatives. There are many different types, I'm not going to pretend expertise beyond what I've mentioned though.
Watch the movie The Big Short about the 2007-08 housing burst bubble-I submit ALL the banks listed will fail, because USA Inc is floating on fiat digital dollars. 😒
Excellent point. My comment didn't really take the other types of CDOs into consideration and might be a bit out-dated. What other types of CDO bombs do we have exploding up in this right now would be a good follow-up question. Any ideas?
You should watch The Big Short if you haven't' already. Good movie about 2008 crisis.
Thanks! Will look into it!