A Secretive Banking Elite Rules Trading in Derivatives

There is only one elite, and It is US

You have done such a great job with this thread Nicorette, and everyone else too,

I just hate to see it ...diminished.

imho - the elite is NOT us. We have been assigned the role of peasants, and question our "place" at our own peril.

reply to post by Nicorette


The headline I'd really like to read:

"A Secretive 'Thanking' Elite Schools Banking Deviates" one by one....

As some have pointed out in this thread, financial derivatives are like instruments of gambling. They are a subset of "financial instruments". The principles of derivatives are the same as gambling: the dealer tries to set up a game that he/she does not lose and make sure the game attracts various parties to play. These parties can be individuals, institutions and even national governments.

However, using the word "gambling" to define financial derivatives is an over-generalization. To understand derivatives, you have to go a bit further. Gambling is all about risk acceptance. To someone very risk-averse, a success probability of 90% can still be a "gamble". To someone risk-taking, a success probabillity of 30% can be a sure thing. Gambling or not, it is not in the absolute but the extent. Therefore, anything can be a gamble. To risk-takers, "Life is a gamble".

In fact, many types of deravitives can be viewed as tradable insurance policies. Imagine that you can resell your health insurance with your endorsement on a secondary market, should the insurance companies allow! Those who issue (or create) derivatives have a mindset similar to insurance companies. They attract you to buy the insurances by appealing to your fear and greed. In insurance industry, they talk about "coverage" (What if you die tomorrow from an accident?), while in derivatives, they emphasize "hedging" (What if a country default on its debt obligations? CDS). You jump in because you want the coverage or the hedge, and you think it is necessary and can be achieved. Its all about your perceptions. Coverage and hedging are both marketing jargons for risk-averse parties. To attract risk-takers, derivatives issuers (underwriters) play on the "hope" of speculation (read: bet). No matter which culture you are in, there are always individuals or groups who have the dream to "win" wealth not by working but by betting. You know it. Greedy people are everywhere. You can't live without them!

Some derivatives are pure bets, such as index options. Some has connection to real assets through delivery of "underlying assets", such as commodity futures and stock options. The connection to "reality" lies in the fact that, if you wait until the maturity of these derivatives, you would have to "go under" and deliver the promised assets, be it commodities or stocks. Consider these "deliverable" derivatives as gambling that involves your own assets or even your wife!! What if you lose, you'd have to give away your spouse because of the agreement you signed?? ;-)

Why do banks wish to recruit physics graduate for their derivatives business? Because they are usually the underwriters of derivatives. To make it simpler, they sell insurance policies. Insurance companies operate on econometrics. They must make sure that their gains from insurance premiums far outweigh their loss on insurance claims. This is mostly based on the calculation of probabilities and statistics: how many people are usually sick amongst the whole population? What are the likelihood of death of a certain age group? To be accurate on your estimate, you'll need serious statistics and mathematical models. In options, it is called the "underwriter's strategy". I have only used the examples of life and health insurance. What if the derivatives involve the likelihood of default of a country? What if it involves weather (weather derivatives)? It can be much more fluid and complex than common insurances.

For those buying the derivatives (banks as the major players again), they also need to understand the contraints and probabilities. Graduates with mathematical backgrounds are favored for the econometrics tasks as well. The difference for speculators is that you will not be able to replicate the model of underwriters totally, but you still need to make your modelling as accurate as possible.

Yes, there are sophisticated softwares to model the complexities. Yet the softwares are based on mathematical models, which in turn are based on correct understanding of environmental variables. Because the environments are not totally understood and they change from time to time, you need to keep adapting your models and keep them as accurate as possible. Who are the most capable of such modelling tasks? Those who have a strong mathematical and logical background. Physics majors are one of the kind. Graduates of econometrics and applied mathematics are good candidates, too.

Coming back to the similarity between insurance and derivatives, we can all see the reality here: Insurances are necessary. For some members of a population to be willing to take risks (for the advancement of the group), the potential loss from failure should be spread among the whole population. The question is: how many insurance do we need and how much insurance can a society sustain?? Nothing can grow forever and everything has a cost. The same goes for derivatives. The current problem is that derivatives are out of control. Bankers to blame, definitely. But individuals who surrender to their greed and fear are responsible, too.

All in all, what is the underpinning premise of derivatives? Easy! It is ownership. If you cannot own anything, what is use of gambling, even if you like it so much? Some gamblers in some countries are even willing to give away their house or spouse when they are desperate, because of what? Because they consider themselves "owners" of their propoerty and spouse. It is all because of ownership, the source of evil of capitalism.

No, no no don't you know?

Rich people 'work hard' for their money...

If you're poor... Why! You're not 'working hard enough'.

Alex Jones is trashed because of Bill William Cooper who championed this shyt we claim as petyy bloggers on the internet. Alex Jones must answer for the charges Cooper set against him and figure out why. Willaim Cooper accused Alex Jones to b a Jesuit disinfo agent; Davis=d Icke a sidenote. Yeah I said it so let him answer or ignore it.
IDGAF eithr way I judge for myself. IDK about a MSM truth seeker.

Originally posted by thewanger
Duh? Smoking or non-smoking? Did you just wake up? Alex Jones has been saying this for ten years. And I've been listening for eight. You can tell the disinfo people on ATS(or anywhere) because they ALWAYS trash him. Welcome to the party, pal.

And the names of the elite 9 who control the derivities market? *drumroll*

Thomas J. Benison of JPMorgan Chase & Company
James J. Hill of Morgan Stanley
Athanassios Diplas of Deutsche Bank
Paul Hamill of UBS
Paul Mitrokostas of Barclays
Andy Hubbard of Credit Suisse
Oliver Frankel of Goldman Sachs
Ali Balali of Bank of America
Biswarup Chatterjee of Citigroup

Wouldn't it be marvelous to read obituaries on these guys?

A small but massively powerful banker elite meeting in top secrecy to control and dominate world finance...

Mainstream media endorses conspiracy theory!

I have never really understood derivatives since learning about them in high school, but they stank. Some great posts here have helped clear up the issue - gambling, scamming and the worlds biggest casino. Since finding out the truth about 9/11 it is no surprise the Global Financial Collapse happened as such evil corruption has a free rein. Nothing is 'too big to fail' as even our sun will run out of fuel on day, it is just another lie that is delaying and expanding the fallout when it does happen.

The devil is in the detail and there is too much of it encompassing our lives. Clear, simple and transparent accounting rules is my vote for a way out of this mess, burn the rest. Sort out those buggers behind 9/11 while you are at and America my still have a chance of staying on top.

reply to post by killallbullies


That was an excellent expose of derivatives. I particularly liked the comparison with insurance. So true !

reply to post by killallbullies


I appreciate the added detail in what derivatives are, but the issue is not what they are, but how they are being traded: secretly, in the dark, without regulation, and through price-fixing; and that they have been allowed to grow so large as to dwarf the real economy and hold governments and actual businesses hostage, forcing bailouts practically at gunpoint and austerity measures across the board to sustain these massive cons.

Here is a good Zerohedge article that breaks down how these work and who benefits.

Attached are several charts used to explain to confused politicians all they need to know about the biggest ponzi scheme market ever created (synthetic derivatives), how these derivatives are created, how the leverage attributed to just one asset can result in infinite amplification of risk, and how Goldman is in the very middle of a web which encompasses tens if not hundreds of trillions in derivative counterparty exposure with virtually every single other financial company in the world.

Here's another one from the same site, commenting directly on the NY Times article:
link

reply to post by Nicorette


Another delightfully succinct synopsis. Brava!

...the issue is not what they are, but how they are being traded: secretly, in the dark, without regulation, and through price-fixing; and that they have been allowed to grow so large as to dwarf the real economy and hold governments and actual businesses hostage, forcing bailouts practically at gunpoint and austerity measures across the board to sustain these massive cons.