What Is a Derivative?

reply to post by Mary Rose

The retail borrowers would be the main street folks, small businesses. These derivatives were sold to many small banks and other investors. They are losing their butts, and often now don't have the resources to lend.
Look at Bernie M. and all of those people that lost money. Now consider that the largest investment bankers were essentially running a similar ponzi scheme with these derivatives, sold worldwide. Where are they going to go to keep the bubble inflated, Mars?
Is there life on Mars? Would they like to invest in AAA rated securities?

Listening to Max Keiser is this video, I am reminded of this thread. At 11:58:

"If you want to understand derivatives, keep this image in your mind: Take a dollar bill, and walk into a house of mirrors. You'll say, OMG, there's thousands of these dollar bills! No, those are mirrored reflections of your dollar. They're not real - that's a derivative. It's the same bet on the same dollar over and over and over again. A credit default swap, by the way, is sold as an insurance product. But there's no collateral backing a credit default swap ..."