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AnastomosisJihad
Hominid



Registered: 01/01/08
Posts: 700
Loc: Ohio
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Credit default swap; illegal drug?
#12722261 - 06/10/10 06:43 PM (13 years, 8 months ago) |
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Credit-default swaps (C.D.S.) are particularly dangerous. They allow people to buy insurance on the survival of a company or a country while handing them a license to kill. C.D.S. ought to be available to buyers only to the extent that they have a legitimate insurable interest.
From Soros' speech today. Full text here: http://dealbook.blogs.nytimes.com/2010/06/10/the-full-soros-speech-on-act-ii-of-the-crisis/
It strikes me that a ban on CDSs might have a similar effect as the recent ban on mephedrone. One is a synthetic designer drug, the other is a synthetic financial instrument.
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Edited by AnastomosisJihad (06/10/10 09:43 PM)
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Silversoul
Rhizome


Registered: 01/01/05
Posts: 23,576
Loc: The Barricades
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Quote:
AnastomosisJihad said: Credit-default swaps (C.D.S.) are particularly dangerous. They allow people to buy insurance on the survival of a company or a country while handing them a license to kill. C.D.S. ought to be available to buyers only to the extent that they have a legitimate insurable interest.
From Soros' speech today. Full text here: http://dealbook.blogs.nytimes.com/2010/06/10/the-full-soros-speech-on-act-ii-of-the-crisis/
It strikes me that a ban on CDSs might have a similar effect as the recent ban on mephedrone. One is a synthetic designer drug, the other is a synthetic financial instrument.
If you overload on heroin, you end up killing yourself. If you overload on debt instruments, you end up killing the whole economy.
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Mr.Al
Alphabet soup



Registered: 05/27/07
Posts: 5,388
Loc: N.S.A. D.C.
Last seen: 1 month, 19 days
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Re: Credit default swap; illegal drug? [Re: Silversoul]
#12734954 - 06/13/10 08:11 AM (13 years, 8 months ago) |
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Quote:
Silversoul said:
Quote:
AnastomosisJihad said: Credit-default swaps (C.D.S.) are particularly dangerous. They allow people to buy insurance on the survival of a company or a country while handing them a license to kill. C.D.S. ought to be available to buyers only to the extent that they have a legitimate insurable interest.
From Soros' speech today. Full text here: http://dealbook.blogs.nytimes.com/2010/06/10/the-full-soros-speech-on-act-ii-of-the-crisis/
It strikes me that a ban on CDSs might have a similar effect as the recent ban on mephedrone. One is a synthetic designer drug, the other is a synthetic financial instrument.
If you overload on heroin, you end up killing yourself. If you overload on debt instruments, you end up killing the whole economy.
Quote:
Silversoul said:
Quote:
AnastomosisJihad said: Credit-default swaps (C.D.S.) are particularly dangerous. They allow people to buy insurance on the survival of a company or a country while handing them a license to kill. C.D.S. ought to be available to buyers only to the extent that they have a legitimate insurable interest.
From Soros' speech today. Full text here: http://dealbook.blogs.nytimes.com/2010/06/10/the-full-soros-speech-on-act-ii-of-the-crisis/
It strikes me that a ban on CDSs might have a similar effect as the recent ban on mephedrone. One is a synthetic designer drug, the other is a synthetic financial instrument.
If you overload on heroin, you end up killing yourself. If you overload on debt instruments, you end up killing the whole economy.
What allows the massive proliferation of debt instruments to occur?
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AnastomosisJihad
Hominid



Registered: 01/01/08
Posts: 700
Loc: Ohio
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Re: Credit default swap; illegal drug? [Re: Mr.Al]
#12754800 - 06/16/10 08:26 PM (13 years, 8 months ago) |
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The point is not so much that credit default swaps are dangerous to the economy, they clearly can be.
My point is this - Is it really possible to ban them? Great Brittan banned mephedrone and it was quickly replaced by a new synthetic drug with similar effects. If we ban CDSs, would a new synthetic be created to take its place?
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Silversoul
Rhizome


Registered: 01/01/05
Posts: 23,576
Loc: The Barricades
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Quote:
AnastomosisJihad said: The point is not so much that credit default swaps are dangerous to the economy, they clearly can be.
My point is this - Is it really possible to ban them? Great Brittan banned mephedrone and it was quickly replaced by a new synthetic drug with similar effects. If we ban CDSs, would a new synthetic be created to take its place?
We could make regulations that require people to have an insurable interest and have the money to back up their bets. Even if some violators manage to slip under the radar, they won't do much damage to the economy unless their scheme gets big enough for the regulators to catch whiff of it. The real impediments to this are not lack of enforceability, but rather the lack of political will and the danger of regulatory capture.
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Mr.Al
Alphabet soup



Registered: 05/27/07
Posts: 5,388
Loc: N.S.A. D.C.
Last seen: 1 month, 19 days
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Quote:
Silversoul said:
Quote:
AnastomosisJihad said: The point is not so much that credit default swaps are dangerous to the economy, they clearly can be.
My point is this - Is it really possible to ban them? Great Brittan banned mephedrone and it was quickly replaced by a new synthetic drug with similar effects. If we ban CDSs, would a new synthetic be created to take its place?
We could make regulations that require people to have an insurable interest and have the money to back up their bets. Even if some violators manage to slip under the radar, they won't do much damage to the economy unless their scheme gets big enough for the regulators to catch whiff of it. The real impediments to this are not lack of enforceability, but rather the lack of political will and the danger of regulatory capture.
Quote:
AnastomosisJihad said: The point is not so much that credit default swaps are dangerous to the economy, they clearly can be.
My point is this - Is it really possible to ban them? Great Brittan banned mephedrone and it was quickly replaced by a new synthetic drug with similar effects. If we ban CDSs, would a new synthetic be created to take its place?
I think that those who favor "regulation" are barking up the wrong tree...
Regulations are utilized to treat the symptoms of the disease.
It is much like a morbidly obese patient starting a new cholesterol medication...
Is it not strange that the market regulations (medications?) keep piling up and the patient (economy) is getting sicker?
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