Most of the attention in the latest banking scandal has centred on fixing the Libor rate but the mis-selling of complex derived financial products to small businesses that don’t need them, can’t understand them, and are in danger of being bankrupted by them is equally significant. The headline case in the news was a Halal butcher now paying £64,000 a year for a financial product that was supposed to hedge against changes in interest rates!
These derivatives started the financial crisis – credit default swaps (CDS), collateralised debt obligations (CDO) and the rest and they are at the heart of the disaster. They and practices such as short-selling and spread betting on commodities were justified by the industry as ways of supposedly making the market more efficient. But what they actually did was create the biggest instability in history. And, even if they hadn’t created the crash, in reality they were derivatives designed to impoverish the real economy and make rich the operators of this shadow banking operation.
The word decadence has experienced a slippage of meaning in recent times. Most people think instantly of depraved sexual behaviour but what it really means is a state in which over-elaborated, parasitical, and unproductive practices have come to dominate over productive and useful ones. As such, derivatives, which do not deal with good and services but with derivatives of goods and services (ie the price something might have in a year’s time), are decadence defined. We are told that derivatives trade more than the entire planet’s GDP. But how can this be? Money is a means of exchange between different acts of production. It prices the activity of labour in producing goods and services against the cost of buying them. Innovations in finance once made world trade flourish but these financial innovations are parasitical devices that are destroying the real economy. CDOs and CDS’s came tricked out in fancy, purportedly infallible mathematical equations. It was all fraudulent. The only equation you need to know is:
Derivatives = decadence
These derivatives started the financial crisis – credit default swaps (CDS), collateralised debt obligations (CDO) and the rest and they are at the heart of the disaster. They and practices such as short-selling and spread betting on commodities were justified by the industry as ways of supposedly making the market more efficient. But what they actually did was create the biggest instability in history. And, even if they hadn’t created the crash, in reality they were derivatives designed to impoverish the real economy and make rich the operators of this shadow banking operation.
The word decadence has experienced a slippage of meaning in recent times. Most people think instantly of depraved sexual behaviour but what it really means is a state in which over-elaborated, parasitical, and unproductive practices have come to dominate over productive and useful ones. As such, derivatives, which do not deal with good and services but with derivatives of goods and services (ie the price something might have in a year’s time), are decadence defined. We are told that derivatives trade more than the entire planet’s GDP. But how can this be? Money is a means of exchange between different acts of production. It prices the activity of labour in producing goods and services against the cost of buying them. Innovations in finance once made world trade flourish but these financial innovations are parasitical devices that are destroying the real economy. CDOs and CDS’s came tricked out in fancy, purportedly infallible mathematical equations. It was all fraudulent. The only equation you need to know is:
Derivatives = decadence
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