Quote:
Originally Posted by epitome
Awesome! It puts things into perspective.
The derivatives have always scared me.
I once read that they are essentially like getting five insurance polices on your neighbors house, burning it down and then collecting the full value of their home five times. Not your house, but your neighbors. That is why the exposure is $644 TRILLION. How many times our GDP is that?
Somebody is going to have to hit a reset switch (with the rest of the world getting on board) or we may end up fuxored into the third world.
|
Another thing with derivatives is that you don't have to have all the money up front, you only have to have about 10%. So it would be like getting 5 insurance policies on your neighbors home and only had to pay 10% of the premium up front. But they would only last for 5 years. If the house didn't burn down in 5 years you had pay the full amount of the premiums. So you can gamble. If you win you can win big, but if you lose you can lose big too.
It is all creating wealth out of thin air and stuff like this has to stop if we are every going to get back on track and have an economy that is stable.