Financial Derivatives Quotes

Derivatives are financial weapons of mass destruction.

As the twenty-first century unfolds, it is becoming more and more evident that the major problems of our time – energy, the environment, climate change, food security, financial security – cannot be understood in isolation. They are systemic problems, which means that they are all interconnected and interdependent. Ultimately, these problems must be seen as just different facets of one single crisis, which is largely a crisis of perception. It derives from the fact that most people in our modern society, and especially our large social institutions, subscribe to the concepts of an outdated worldview, a perception of reality inadequate for dealing with our overpopulated, globally interconnected world.

The truth is that banks are the last feudal kingdoms, their rulers omnipotent, divine warlords. Their key lieutenants are 'ronin' (wandering mercenary samurai) who roam financial markets ready to ally themselves to any warlord for a share of plunder. This is not the place to apply the latest management theory.

Since the 1970S, financial innova­tions such as the securitisation of mortgage debt and the spreading of investment risks through the creation of derivative markets, all tacitly (and now, as we see, actually) backed by state power, have permitted a huge flow of excess liquidity into all facets of urbanisa­tion and built environment construction worldwide.

Simply, humans should not be given explosive toys (like atomic bombs, financial derivatives, or tools to create life).

Fashion models and financial models are similar. They bear a similar relationship to everyday world. Like supermodels, financial models are idealized representations of the real world, they are not real, they don't quite work the way that the real world works. There is celebrity in both worlds. In the end, there is the same inevitable disappointment" - Satyajit Das, Traders, Guns & Money

The final neoliberal fallback is geoengineering, which derives from the core neoliberal doctrine that entrepreneurs, unleashed to exploit acts of creative destruction, will eventually innovate market solutions to address dire economic problems. This is the whiz-bang futuristic science fiction side of neoliberalism, which appeals to male adolescents and Silicon Valley entrepreneurs almost as much as do the novels of Ayn Rand.

Investors look at economic fundamentals; traders look at each other; ‘quants’ look at the data. Dealing on the basis of historic price series was once described as technical analysis, or chartism (and there are chartists still). These savants identify visual patterns in charts of price data, often favouring them with arresting names such as ‘head and shoulders’ or ‘double bottoms’. This is pseudo-scientific bunk, the financial equivalent of astrology. But more sophisticated quantitative methods have since proved profitable for some since the 1970s’ creation of derivative markets and the related mathematics. Profitable

There are many things from which I might have derived good, by which I have not profited, I dare say, 'Christmas among the rest. But I am sure I have always thought of Christmas time, when it has come round -- apart from the veneration due to its sacred name and origin, if anything belonging ti it can be apart from that -- as a good time; a kind, forgiving, charitable, pleasant time: the only time I know of, in the long calendar of the year, when men and women seem by one consent to open their shut-up hearts freely, and to think of people below them as if they really were fellow-passengers to the grave, and not another race of creatures bound on other journeys.

Real wealth is derived from a blend of financial and social capital. Social capital? While it is vital to our everyday lives (and happiness), the concept of social capital remains something of a mystery to most Americans.

I started to see the bigger picture of things: Islam was not relegated to the tiny, sometimes frustrating and seemingly arbitrary details of practice, but rather entered the larger picture of spirituality and worship that contextualized my womanhood. In order to be able to derive these logical conclusions about my religion, I had to go back to the basics and understand the very fundamental principles upon which it was founded: justice, social equality, racial equality, financial equality, and, possibly most important of all, gender equality. Thus began my lifelong love affair with Islamic feminism.

Meanwhile, bank executives bristled—sometimes privately, but often in the press—at any suggestion that they had in any way screwed up, or should be subject to any constraints when it came to running their business. This last bit of chutzpah was most pronounced in the two savviest operators on Wall Street, Lloyd Blankfein of Goldman Sachs and Jamie Dimon of JPMorgan Chase, both of whom insisted that their institutions had avoided the poor management decisions that plagued other banks and neither needed nor wanted government assistance. These claims were true only if you ignored the fact that the solvency of both outfits depended entirely on the ability of the Treasury and the Fed to keep the rest of the financial system afloat, as well as the fact that Goldman in particular had been one of the biggest peddlers of subprime-based derivatives—and had dumped them onto less sophisticated customers right before the bottom fell out.

For example, trading in S&P 500-linked futures totaled more than $60 trillion(!) in 2011, five times the S&P 500 Index total market capitalization of $12.5 trillion. We also have credit default swaps, which are essentially bets on whether a corporation can meet the interest payments on its bonds. These credit default swaps alone had a notional value of $33 trillion. Add to this total a slew of other derivatives, whose notional value as 2012 began totaled a cool $708 trillion. By contrast, for what it’s worth, the aggregate capitalization of the world’s stock and bond markets is about $150 trillion, less than one-fourth as much. Is this a great financial system . . . or what!

The government system we have now is set up just like that of Rome and is changing into a system I call Corpocracism (Babylon, United States). Corpocracism is a word derived from some entities of feudalism, democracy, capitalism, classism, and corporatism to form a government system into a dictatorship and police state. This system is being brought about by a group of people in our own government, corporations, financial institutions and foreign entities. It is an ideology of hypocrisy that is leading to an JerUSAlem (America) that will sale off every aspect of its nations people to be captive to foreign entities such as corporations, governments, lawyers, financial institutions, banks, individuals and groups of individuals.

Traders risk the bank’s capital: they literally bet the bank, at least up to their limits. If they win then they get a share of the winnings. If they lose, then the bank picks up the loss. Traders might lose their jobs but the money at risk is not their own, it’s all OPM – other people’s money. What if the losses threaten the bank’s survival? Most banks are now ‘too big to fail’ and they can count on government support. Regulators are wary about ‘systemic risk’, and no regulator with an eye to their place in history wants the banking system to be flushed down the toilet on their watch. Traders can always play the systemic risk trump card. It is the ultimate in capitalism – the privatization of gains, the socialization of losses.

Corporations go to great lengths to employ geniuses: technologists, designers, financial engineers, economists, artists even. I’ve seen it happen,’ he said. ‘But what have they done with them? They channel all that talent and creativity towards humanity’s destruction. Even when it is creative, Eva, capitalism is extractive. In search of shareholder profit, corporations have put these geniuses in charge of extracting the last morsel of value from humans and from the earth, from the minerals in its guts to the life in its oceans. And these brilliant minds have been used to cajole governments into accepting their raids on the planet’s resources by creating markets for them: markets for carbon dioxide and other pollutants – phoney markets controlled by their employers! Unlike the East India Company, the Technostructure does not need its own armies. It owns our states and their armies, because it controls what we think. The dirtier the industry, the richer and more despised, the more its captains have been able to tap into the rivers of debt-derived money to purchase influence and to blunt opposition. Previously they would buy newspapers and set up TV stations; now they employ armies of lobbyists, found think tanks, litter the Internet with their trolls and, of course, direct monumental campaign donations to the chief enablers of our species’ extinction, the politicians.

If the invention of derivatives was the financial world's modernist dawn, the current crisis is unsettlingly like the birth of postmodernism. For anyone who studied literature in college in the past few decades, there is a weird familiarity about the current crisis: value, in the realm of finance capital, parallels the elusive nature of meaning in deconstrucitonism. According to Jacques Derrida, the doyen of the school, meaning can never be precisely located; instead, it is always 'deferred,' moved elsewhere, located in other meanings, which refer and defer to other meanings—a snake permanently and necessarily eating its own tail. This process is fluid and constant, but at moments the perpetual process of deferral stalls and collapses in on itself. Derrida called this moment an 'aporia,' from a Greek term meaning 'impasse.' There is something both amusing and appalling about seeing his theories acted out in the world markets to such cataclysmic effect.

You may well ask: when the bubble finally burst, why did we not let the bankers crash and burn? Why weren't they held accountable for their absurd debts? For two reasons. First because the payment system - the simple means of transferring money from one account to another and on which every transaction relies - is monopolised by the very same bankers who were making the bets. Imagine having gifted your arteries and veins to a gambler. The moment he loses big at the casino, he can blackmail you for anything you have simply by threatening to cut off your circulation. Second, because the financiers' gambles contained deep inside the title deeds to the houses of the majority. A full-scale financial market collapse could therefore lead to mass homelessness and a complete breakdown in the social contract. Don't be surprised that the high and mighty financiers of Wall Street would bother financialising the modest homes of poor people. Having borrowed as much as they could off banks and rich clients in order to place their crazy bets, they craved more since the more they bet, the more they made. So they created more debt from scratch to use as raw materials for more bets. How? By lending to impecunious blue collar worker who dreamed of the security of one day owning their own home. What if these little people could not actually afford their mortgage in the medium term? In contrast to bankers of old, the Jills and the Jacks who actually leant them the money did not care if the repayments were made because they never intended to collect. Instead, having granted the mortgage, they put it into their computerised grinder, chopped it up literally into tiny pieces of debt and repackaged them into one of their labyrinthine derivatives which they would then sell at a profit. By the time the poor homeowner had defaulted and their home was repossessed, the financier who granted the loan in the first place had long since moved on.

My father tells a story about Richard Feynman, who’d been dubbed the Great Explainer because of his talent for explaining theoretical physics. When a journalist asked him to describe in three minutes what he’d won the Nobel Prize for, Feynman replied that if he could explain it in three minutes, it wouldn’t be worth a Nobel Prize. Feynman, I think, is making the wider point that an explanation of something by reducing it and simplifying it over and over, until all that’s left is some familiar metaphor that is actually without content, helps no one’s understanding of the thing itself and is only the repetition of a familiar image. Even the basic elements of financial derivatives are mathematical. But quite apart from the mathematical content, the other problem is that to understand derivatives requires, I think, an understanding of other more basic ideas in finance, whether or not they in turn have some mathematical content. It’s accretive, to use Zafar’s language. Perhaps this is not exclusive to finance. As far as I can tell, medicine is just the same, as well as the law.

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation. We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, --That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government. . . When a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.

It was during the 1970s that statisticians decided it would be a good idea to measure banks’ “productivity” in terms of their risk-taking behavior. The more risk, the bigger their slice of the GDP.14 Hardly any wonder, then, that banks have continually upped their lending, egged on by politicians who have been convinced that the financial sector’s slice is every bit as valuable as the whole manufacturing industry. “If banking had been subtracted from the GDP, rather than added to it,” the Financial Times recently reported, “it is plausible to speculate that the financial crisis would never have happened.”15 The CEO who recklessly hawks mortgages and derivatives to lap up millions in bonuses currently contributes more to the GDP than a school packed with teachers or a factory full of car mechanics. We live in a world where the going rule seems to be that the more vital your occupation (cleaning, nursing, teaching), the lower you rate in the GDP. As the Nobel laureate James Tobin said back in 1984, “We are throwing more and more of our resources, including the cream of our youth, into financial activities remote from the production of goods and services, into activities that generate high private rewards disproportionate to their social productivity.”16

But derivatives did create new dangers. If you were making a loan, and you were confident you could hedge some of the credit risk of that loan, you might be tempted to make a larger and riskier loan. And the instruments themselves often had leverage embedded in them, so investors could be exposed to greater losses than they realized. Firms weren’t required by law to post any collateral (or “margin”) to make derivatives trades, and the market wasn’t requiring them to post much, either. This meant fewer shock absorbers for the system if those trades went bad. That’s why Warren Buffett had called derivatives “financial weapons of mass destruction.

Great speech to the German Reichstag Berlin, January 30, 1939 Once again I will be a prophet: should the international Jewry of finance (Finanzjudentum) succeed, both within and beyond Europe, in plunging mankind into yet another world war, then the result will not be a Bolshevization of the earth and the victory of Jewry, but the annihilation (Vernichtung) of the Jewish race in Europe. Thus, the days of propagandist impotence of the non-Jewish peoples are over. National Socialist Germany and Fascist Italy possess institutions which, if necessary, permit opening the eyes of the world to the true nature of this problem. Many a people is instinctively aware of this, albeit not scientifically versed in it. At this moment, the Jews are still propagating their campaign of hatred in certain states under the cover of press, film, radio, theater, and literature, which are all in their hands. Should indeed this one Volk attain its goal of prodding masses of millions from other peoples to enter into a war devoid of all sense for them, and serving the interests of the Jews exclusively, then the effectiveness of an enlightenment will once more display its might. Within Germany, this enlightenment conquered Jewry utterly in the span of a few years. Peoples desire not to perish on the battlefield just so that this rootless, internationalist race can profit financially from this war and thereby gratify its lust for vengeance derived from the Old Testament. The Jewish watchword “Proletarians of the world, unite!” will be conquered by a far more lofty realization, namely: “Creative men of all nations, recognize your common foe!

Markopolos first heard about Madoff in the late 1980s. The hedge fund he worked for had noticed Madoff’s spectacular returns, and they wanted Markopolos to copy Madoff’s strategy. Markopolos tried. But he couldn’t figure out what Madoff’s strategy was. Madoff claimed to be making his money based on heavy trading of a financial instrument known as a derivative. But there was simply no trace of Madoff in those markets. “I was trading huge amounts of derivatives every year, and so I had relationships with the largest investment banks that traded derivatives,” Markopolos remembers. So I called the people that I knew on the trading desks: “Are you trading with Madoff?” They all said no. Well, if you are trading derivatives, you pretty much have to go to the largest five banks to trade the size that he was trading. If the largest five banks don’t know your trades and are not seeing your business, then you have to be a Ponzi scheme. It’s that easy. It was not a hard case. All I had to do was pick up the phone, really.

Here are the main facts:1 Between 1980 and 2016, average national income per adult, expressed in 2016 euros, rose from 25,000 euros to just over 33,000 euros, or a rise of approximately 30%. At the same time, the average wealth held derived from property per adult doubled, rising from 90,000 to 190,000 euros. Yet more striking: the wealth of the richest 1%, 70% of which is in financial assets, rose from 1.4 to 4.5 million euros, or increased more than threefold. As to the 0.1% of the wealthiest, 90% of whose wealth is held in financial assets, and who will be the main beneficiaries of the abolition of the wealth tax, their fortunes rose from 4 to 20 million euros, that is, they increased fivefold. In other words, the biggest fortunes in financial assets rose even more rapidly than property assets, whereas the opposite should have been the case if the hypothesis of a fiscal flight were true. Moreover, this type of finding is a characteristic in the ranking of fortunes, in France as in all countries. According to Forbes, the top world fortunes, which are almost exclusively held in financial assets—have risen at a rate of 6% to 7% per year (on top of inflation) since the 1980s, or 3–4 times more rapidly than growth in GDP and of world per capita wealth.

Ultimately, the World Top Incomes Database (WTID), which is based on the joint work of some thirty researchers around the world, is the largest historical database available concerning the evolution of income inequality; it is the primary source of data for this book.24 The book’s second most important source of data, on which I will actually draw first, concerns wealth, including both the distribution of wealth and its relation to income. Wealth also generates income and is therefore important on the income study side of things as well. Indeed, income consists of two components: income from labor (wages, salaries, bonuses, earnings from nonwage labor, and other remuneration statutorily classified as labor related) and income from capital (rent, dividends, interest, profits, capital gains, royalties, and other income derived from the mere fact of owning capital in the form of land, real estate, financial instruments, industrial equipment, etc., again regardless of its precise legal classification). The WTID contains a great deal of information about the evolution of income from capital over the course of the twentieth century. It is nevertheless essential to complete this information by looking at sources directly concerned with wealth. Here I rely on three distinct types of historical data and methodology, each of which is complementary to the others.25 In the first place, just as income tax returns allow us to study changes in income inequality, estate tax returns enable us to study changes in the inequality of wealth.26 This

Still, when Harvard said I wasn’t eligible for financial aid, and another university offered me a full scholarship, I thought I should go there. My mother became furious and said I was always sabotaging myself. She was proud of being able to borrow money at a loss from her own retirement fund, and give it to Harvard. I felt proud of her, too. But I did not feel proud of myself. It made the college application process feel, in retrospect, somehow hurtful and insulting: all the essays and interviews and supplements and letters seemed to be about you, about your specialness—but actually it was all about shaking your parents down for money. — Harvard seemed really proud of its own attitude toward financial aid. You were always hearing about how “merit-based aid,” which was fine for other schools, didn’t work here, where everyone was so full of merit. When your parents paid full tuition, part of what they were paying for was the benefit you derived from being exposed to people who were more diverse than you. “My parents are paying for him to be here, so I can learn from him,” my friend Leora said once, about a homeschooled guy from Arkansas in her history section who started talking about how the Jews killed Jesus. Leora had been my best friend when we were little, and then we went to different middle schools and high schools, but now we were at college together. She already thought every single person on earth was anti-Semitic, so she definitely hadn’t learned anything from that guy. To me, the part of financial aid that made the least sense was that all the international students got full scholarships, regardless of how much money their parents had. The son of the prince of Nepal was in our class, and didn’t pay tuition. Ivan had once caused me pain by saying something deprecating about “people whose parents paid a hundred thousand dollars for them to be here.” Did he not know that my parents were paying a hundred thousand dollars for me to be there? The thought that really made me crazy was that my parents had paid for Ivan to be there. It was another experience they had paid for me to have.

Marx discovered the significance of economic power; and it is understandable that he exaggerated its status. He and the Marxists see economic power everywhere. Their argument runs: he who has the money has the power; for if necessary, he can buy guns and even gangsters. But this is a roundabout argument. In fact, it contains an admission that the man who has the gun has the power. And if he who has the gun becomes aware of this, then it may not be long until he has both the gun and the money. But under an unrestrained capitalism, Marx’s argument applies, to some extent; for a rule which develops institutions for the control of guns and gangsters but not of the power of money is liable to come under the influence of this power. In such a state, an uncontrolled gangsterism of wealth may rule. But Marx himself, I think, would have been the first to admit that this is not true of all states; that there have been times in history when, for example, all exploitation was looting, directly based upon the power of the mailed fist. And to-day there will be few to support the naïve view that the ‘progress of history’ has once and for all put an end to these more direct ways of exploiting men, and that, once formal freedom has been achieved, it is impossible for us to fall again under the sway of such primitive forms of exploitation. These considerations would be sufficient for refuting the dogmatic doctrine that economic power is more fundamental than physical power, or the power of the state. But there are other considerations as well. As has been rightly emphasized by various writers (among them Bertrand Russell and Walter Lippmann25), it is only the active intervention of the state—the protection of property by laws backed by physical sanctions—which makes of wealth a potential source of power; for without this intervention, a man would soon be without his wealth. Economic power is therefore entirely dependent on political and physical power. Russell gives historical examples which illustrate this dependence, and sometimes even helplessness, of wealth: ‘Economic power within the state,’ he writes26, ‘although ultimately derived from law and public opinion, easily acquires a certain independence. It can influence law by corruption and public opinion by propaganda. It can put politicians under obligations which interfere with their freedom. It can threaten to cause a financial crisis. But there are very definite limits to what it can achieve. Cæsar was helped to power by his creditors, who saw no hope of repayment except through his success; but when he had succeeded he was powerful enough to defy them. Charles V borrowed from the Fuggers the money required to buy the position of Emperor, but when he had become Emperor he snapped his fingers at them and they lost what they had lent.’ The dogma that economic power is at the root of all evil must be discarded. Its place must be taken by an understanding of the dangers of any form of uncontrolled power. Money as such is not particularly dangerous. It becomes dangerous only if it can buy power, either directly, or by enslaving the economically weak who must sell themselves in order to live.

Many models are constructed to account for regularly observed phenomena. By design, their direct implications are consistent with reality. But others are built up from first principles, using the profession’s preferred building blocks. They may be mathematically elegant and match up well with the prevailing modeling conventions of the day. However, this does not make them necessarily more useful, especially when their conclusions have a tenuous relationship with reality. Macroeconomists have been particularly prone to this problem. In recent decades they have put considerable effort into developing macro models that require sophisticated mathematical tools, populated by fully rational, infinitely lived individuals solving complicated dynamic optimization problems under uncertainty. These are models that are “microfounded,” in the profession’s parlance: The macro-level implications are derived from the behavior of individuals, rather than simply postulated. This is a good thing, in principle. For example, aggregate saving behavior derives from the optimization problem in which a representative consumer maximizes his consumption while adhering to a lifetime (intertemporal) budget constraint.† Keynesian models, by contrast, take a shortcut, assuming a fixed relationship between saving and national income. However, these models shed limited light on the classical questions of macroeconomics: Why are there economic booms and recessions? What generates unemployment? What roles can fiscal and monetary policy play in stabilizing the economy? In trying to render their models tractable, economists neglected many important aspects of the real world. In particular, they assumed away imperfections and frictions in markets for labor, capital, and goods. The ups and downs of the economy were ascribed to exogenous and vague “shocks” to technology and consumer preferences. The unemployed weren’t looking for jobs they couldn’t find; they represented a worker’s optimal trade-off between leisure and labor. Perhaps unsurprisingly, these models were poor forecasters of major macroeconomic variables such as inflation and growth.8 As long as the economy hummed along at a steady clip and unemployment was low, these shortcomings were not particularly evident. But their failures become more apparent and costly in the aftermath of the financial crisis of 2008–9. These newfangled models simply could not explain the magnitude and duration of the recession that followed. They needed, at the very least, to incorporate more realism about financial-market imperfections. Traditional Keynesian models, despite their lack of microfoundations, could explain how economies can get stuck with high unemployment and seemed more relevant than ever. Yet the advocates of the new models were reluctant to give up on them—not because these models did a better job of tracking reality, but because they were what models were supposed to look like. Their modeling strategy trumped the realism of conclusions. Economists’ attachment to particular modeling conventions—rational, forward-looking individuals, well-functioning markets, and so on—often leads them to overlook obvious conflicts with the world around them.

If we are going to avoid similar financial crises in the future, we need to restrict severely freedom of action in the financial market. Financial instruments need to be banned unless we fully understand their workings and their effects on the rest of the financial sector and, moreover, the rest of the economy. This will mean banning many of the complex financial derivatives whose workings and impacts have been shown to be beyond the comprehension of even the supposed experts. You may think I am too extreme. However, this is what we do all the time with other products – drugs, cars, electrical products, and many others. When a company invents a new drug, for example, it cannot be sold immediately. The effects of a drug, and the human body’s reaction to it, are complex. So the drug needs to be tested rigorously before we can be sure that it has enough beneficial effects that clearly overwhelm the side-effects and allow it to be sold.

The expected value of something is not a good guide to its price.

If our sense of emotional worth comes primarily from our marriage, then we become highly dependent upon that relationship. We become vulnerable to the moods and feelings, the behavior and treatment of our spouse, or to any external event that may impinge on the relationship—a new child, in-laws, economic setbacks, social successes, and so forth. When responsibilities increase and stresses come in the marriage, we tend to revert to the scripts we were given as we were growing up. But so does our spouse. And those scripts are usually different. Different ways of handling financial, child discipline, or in-law issues come to the surface. When these deep-seated tendencies combine with the emotional dependency in the marriage, the spouse-centered relationship reveals all its vulnerability. When we are dependent on the person with whom we are in conflict, both need and conflict are compounded. Love-hate over-reactions, fight-or-flight tendencies, withdrawal, aggressiveness, bitterness, resentment, and cold competition are some of the usual results. When these occur, we tend to fall even further back on background tendencies and habits in an effort to justify and defend our own behavior and we attack our spouse’s. Inevitably, anytime we are too vulnerable we feel the need to protect ourselves from further wounds. So we resort to sarcasm, cutting humor, criticism—anything that will keep from exposing the tenderness within. Each partner tends to wait on the initiative of the other for love, only to be disappointed but also confirmed as to the rightness of the accusations made. There is only phantom security in such a relationship when all appears to be going well. Guidance is based on the emotion of the moment. Wisdom and power are lost in the counterdependent negative interactions. FAMILY CENTEREDNESS. Another common center is the family. This, too, may seem to be natural and proper. As an area of focus and deep investment, it provides great opportunities for deep relationships, for loving, for sharing, for much that makes life worthwhile. But as a center, it ironically destroys the very elements necessary to family success. People who are family-centered get their sense of security or personal worth from the family tradition and culture or the family reputation. Thus, they become vulnerable to any changes in that tradition or culture and to any influences that would affect that reputation. Family-centered parents do not have the emotional freedom, the power, to raise their children with their ultimate welfare truly in mind. If they derive their own

Premium Pricing Improves Commitment We never want our clients to be in situations where it is easy for them to decide to not take our advice. Any time someone hires an outside expert, the ultimate outcome he seeks is to move forward with confidence. What is the value of good advice not acted upon? Yes, it is our job to tell him what to do, but that is often the easy part. We are equally obliged to give him the strength to do it. We are not meeting our full obligations to our clients when we make recommendations that they find easy to ignore. The price we charge for such guidance should be enough that our clients feel compelled to act, lest they experience a profound sense of wasted resources. There must be the appropriate amount of pain associated with our pricing. This implies the need for our pricing to change as the size of the client changes. Larger organizations need to pay more to ensure their commitment. Larger Clients Get Greater Value Another reason larger clients must pay more is they derive greater financial value from similar work we would do for smaller organizations. To charge John Doe Chevrolet what we would charge General Motors for the same work would be irresponsible of us. The larger client pays more to ensure his commitment to solving his problem and to ensure his commitment to working with us – and he pays more because we are delivering a service that has a greater dollar value to him. Reinvesting in Ourselves Of all the investment opportunities we will face in our lives, few will yield returns greater than those opportunities to invest in ourselves. Price premiums give us the profit to reinvest in our people, our enterprise and ourselves. The corporations that we most admire are the ones that invest in research and development. We must follow their path. While others get by on slim margins, winning on price, we will use some of our greater profit margins to better ourselves and put greater distance between our competition and us. Better Margins Equal Better Firms and Better Clients On these many levels, charging more improves our ability to help our clients and increases the likelihood that we will deliver high-quality outcomes. It allows us to select the best clients – those that we are most able to help. Like leaning into the discomfort of money conversations, charging more might not come naturally or seem easy, but it is better for everyone, including the client, and so this too we shall learn to do with confidence.

I could not respect how he functioned so completely immersed in the structures of his professional micro-universe. Yes, I too had previously derived comfort from my firm's exhortations to focus intensely on work, but now I saw that in this constant striving to realize a financial future, no thought was given to the critical personal and political issues that affect one's emotional present. In other words, my blinders were coming off, and I was dazzled and rendered immobile by the sudden broadening of my arc of vision.

Credit” is the third-person singular conjugation of the present tense of the Latin verb credere, “to believe.” It’s the most exceptional and interesting thing in the financial world. Similar leaps of belief underlie every human transaction in life: Your wife might cheat on you, but you hope otherwise. The online store you paid may not ship you your goods, but you trust otherwise. Credit derivatives are just the explicit encapsulations of such beliefs, in financial and contractual form, for corporate entities. Unlike other financial securities, such as shares of IBM stock or oil futures, a credit derivative is not even some theoretical value of a tangible good. It’s the perceived value of a complete intangible, the perception of the probability of meeting some future obligation. People often asked me in the early days of my tech career how I had gone from Wall Street to ads technology. Such a person almost certainly knew nothing about either industry, or the answer would have been obvious. I did the same thing the whole time: putting a price on a human’s perception, be it of a General Motors bond or a pair of shoes coveted on Zappos. It’s the same difference either way; only the scale of the money pile changes.

So many people grapple with various versions of the self-limiting beliefs listed above and with their derivatives. We all have that little voice in our head that tries to hold us back. The best way to silence the voice and move forward with your goal is to fight fear with facts.

This systemic risk problem is what drew Blythe Masters, one of the key figures behind blockchain innovation on Wall Street, into digital ledger technology; she joined Digital Asset Holdings, a blockchain service provider for the financial system’s back-office processing tasks, as CEO in 2014. Masters is best known for one of the most contentious financial innovations of our time, the credit default swap (CDS), a financial derivative contract in which one institution agrees to pay another if a particular bond or loan goes into default. At the age of just twenty-five, and as part of a crack team at J.P. Morgan, she conceived of CDSs as a way for investors to buy insurance against the risk they bear on their balance sheets—and thus to unlock capital hitherto tied up against that risk—as well as for other investors, the banks, and other institutions that issue the CDS to place a bet on the underlying asset without actually owning it.

while our critics saw Bear as a cautionary tale about complex new derivatives, I saw it as a familiar story about a failure to manage risk.

There was one major problem with this provision. International Match did not have 17 million dollars. Indeed, International Match did not have any money. Remember that Ivar previously had moved all of the cash International Match had raised from the gold debentures to Continental, the Liechtenstein subsidiary. Then, he had used the cash from the participating preferred shares to repay the gold debentures. That meant all the money was gone. In order to comply with the secret Poland contract, International Match would need to raise another 17 million dollars right away. In other words, Ivar had signed a promise to give Poland 17 million dollars he didn’t have. The second Poland agreement also contained some extraordinary protections for International Match, terms that would have impressed Lee Higginson’s bankers, if they had seen them. For example, Ivar obtained an agreement that if “for one reason or another” Garanta did not earn enough profit to pay the 24 percent interest payments due to Poland, those payments would be covered by “the income of the Polish Alcohol Monopoly or … the Polish Tobacco Monopoly.”34 In other words, Ivar obtained a promise of payment supported not only by the match monopoly, but by unaffiliated monopolies on alcohol and tobacco. Ivar also included a binary foreign exchange option, a kind of derivative contract, to protect International Match from any declines in the value of the dollar: “International Match Corporation shall have the right to obtain payment of interest in Dutch guilders or US dollars according to its choice and for all such payments one dollar shall be counted as 2½ guilders.”35 Given that Garanta’s shareholders would be nominated by Dr Glowacki, how would Ivar retain control of Garanta? Here, as well, Ivar created another innovative financial provision: During the first four years until October 1, 1929, International Match Corporation shall have the right to appoint the managing director of Garanta who is alone entitled to sign for the company. On or after October 1, 1929, International Match Corporation has the right to acquire 60 percent of the shares at par.36 This option term secured both initial control over Garanta and the right to own a majority of Garanta’s shares in the future. Either way, Ivar, not Dr Glowacki, would have control.

Wall Street’s troubles instantaneously infected the City of London. Thus the Anglosphere went from financial supremacy to global basket case. Officials in Brussels, Paris, Frankfurt and Berlin rejoiced, confident that the “Anglos,” who had been lecturing them regarding the flimsiness of Europe’s monetary union and social market model, had got their comeuppance. Until, that is, they realized that Germany’s and France’s banks were in a state worse than Lehman’s, with their asset books weighed down with US-sourced derivatives that had lost 99 percent of their value.

But even the biggest Wall Street banks were at a disadvantage when they went up against the traders at Koch Industries, British Petroleum, or Amoco. The Wall Street banks didn’t have access to inside information. Goldman Sachs didn’t own refineries or pipelines and couldn’t get a sneak peek into where markets were headed. The banks had to resort to second-rate information that was publicly available, like government reports on monthly energy supplies. It was a losing proposition. In the mid-1990s, the Wall Street banks came to Koch Industries, asking for help. “We kept getting approached by banks, who say, ‘Hey, Koch. You guys are so good at this physical stuff, we’d like to partner with you,’ ” recalled a former senior Koch executive who was heavily involved in trading operations. The banks came to Koch with the same pitch: the banks would handle “all this financial stuff,” while Koch handled the physical end of trading and shared information from its operations. If Koch executives were flattered by the attention from Wall Street, they didn’t show it for long. “We kind of got curious—or, suspicious is the better term,” the executive recalled. Rather than help the banks out, Koch set up a team to study why the banks were so interested in their business. Koch hired the outside consulting firm McKinsey & Company to study what was happening in commodities markets during the 1990s. McKinsey reported that the world of trading had grown even larger and more profitable than Koch Industries had suspected. As it happened, the futures contracts that Koch was trading had become the “plain vanilla” products in a rapidly booming market. Now there were more exotic, more opaque, and far more profitable financial products on the market. These products were called “derivatives.” That’s where the real money was.

After two and half decades of covering the crimes of our oligarchic elites, I go through periods when the impunity of it all gets the better of me. The sweatshops and oil spills. The Iraq invasion. The 2008 financial crisis. The coups that threw a generation of idealists out of helicopters in Latin America. Washington’s coordinated attack on Russia’s nascent post-Soviet democracy that created the oligarchs and paved the way for Vladimir Putin. I simply cannot bear what these people have been able to get away with. No one paid. Everyone gets a reputational rebrand. Henry Kissinger keeps advising presidents. Dick Cheney is hailed as a reasonable Republican. Robert Rubin, one of the men who personally helped inflate the derivatives bubble that melted down the global economy in 2008, now gives advice about how we can’t move too fast to prevent catastrophic climate change. My throat constricts. My breath becomes shallow. On bad days, I feel like I might explode. Impunity can drive a person mad.

Let’s take a look at the five major asset classes: Alternative assets, which are usually physical assets like fine watches, real estate, collectible cars, art, and jewelry Stocks, which represent ownership of a piece of a publicly traded company Fixed-income investments such as government bonds and deposit certificates Cash, such as dollar bills, and cash equivalents such as savings accounts, retirement accounts, and 401(k)s Futures and other derivatives, which are contracts between two parties agreeing to buy and sell assets, usually commodities like gold, corn, wheat, or cows, at a future date

the Grand Cayman connection provided three big advantages to a firm like Lehman Brothers, which was trying desperately to compete with the biggest banks on Wall Street. The first was entering false profits from the “sale” onto the balance sheet. The second was receiving all the coupon payments from the derivatives they still held in the trusts. The third was that the Financial Accounting Standards Board (FASB) required them only to put aside 3 percent of capital, a tiny amount, to cover any losses in an offshore trust.

Certainly there is no limit to taxation if the benefits derived from public services by society measure up to the cost in taxation.”2 As cited in the quotation at the beginning of this chapter, Obama Sr. is even willing to consider tax rates up to 100 percent! It’s remarkable that this paper by Obama Sr. has gotten so little media coverage. One would expect it to be on the front page of every newspaper and a lead item on the evening news, especially during public debates in America over taxes and massive government intervention in the health care and financial sectors. Notice the two-part economic strategy proposed by Obama Sr.: forced state control over private enterprise, and confiscatory tax rates with no upper limit. We will find it instructive to compare this to President Obama’s economic policies. For example, President Obama frequently talks about people being forced to pay their “fair share” in taxes, but he never specifies what that share is. Here, we have a document that explicitly states his father’s thoughts on the subject and may provide some guidance to the son’s own thinking. Yet for many in the media, these father-son comparisons are completely taboo. For them, it seems, the ghost of Barack Obama Sr. must be quietly ignored, so it cannot be seen haunting the corridors of 1600 Pennsylvania Avenue.

Geithner’s proposed terms for the loan—which drew heavily on the work of bankers he had asked to explore options for private financing for AIG—included a floating interest rate starting at about 11.5 percent. AIG would also be required to give the government an ownership share of almost 80 percent of the company. Tough terms were appropriate. Given our relative unfamiliarity with the company, the difficulty of valuing AIG FP’s complex derivatives positions, and the extreme conditions we were seeing in financial markets, lending such a large amount inevitably entailed significant risk. Evidently, it was risk that no private-sector firm had been willing to undertake. Taxpayers deserved adequate compensation for bearing that risk. In particular, the requirement that AIG cede a substantial part of its ownership was intended to ensure that taxpayers shared in the gains if the company recovered. Equally important, tough terms helped address the unfairness inherent in aiding AIG and not other firms, while also serving to mitigate the moral hazard arising from the bailout. If executives at similarly situated firms believed they would get easy terms in a government bailout, they would have little incentive to raise capital, reduce risk, or accept market offers for their assets or their company. The Fed and Treasury had pushed for tough terms for the shareholders of Bear Stearns and Fannie and Freddie for precisely these reasons. The political backlash would be intense no matter what we did, but we needed to show that we got taxpayers the best possible deal and had minimized the windfall that the bailout gave to AIG and its shareholders.

We are convinced that the public generally will derive far better results from fixed-value investments, if selected with exceeding care, than from speculative operations, even though these may be aided by considerable education in financial matters.

This book is about the real CIA and its allies around the world. It is based upon personal experience generally derived from work in the Pentagon from 1955 to 1964. At retirement, I was Chief of Special Operations (clandestine activities) with the U.S. Joint Chiefs of Staff. These duties involved the military support of the clandestine activities of the CIA and were performed under the provisions of National Security Council Directive No. 5412/2. Since this book was first published in 1973, we have witnessed the unauthorized release of the “Pentagon Papers,” “Watergate” and the resignation of President Nixon, the run-away activities of the “Vietnam War,” the “Arab Oil Embargo” that led to the greatest financial heist in history, and the blatantly unlawful “Iran-Contra” affair. All of these were brought about and master-minded by a renegade “Secret Team” that operated secretly, without Presidential direction; without National Security Council approval—so they say; and, generally, without Congressional knowledge. This trend increases. Its scope expands . . . even today.

The warning signs had been there since the crash of 2008, but after the initial shock, nothing had been done to correct the problem. Banks had been trading over $7 trillion in risky derivatives daily, as well as fixing interest rates and making bets on the rigged games. There was an ever-growing gap between the elite and all the rest of the people which had continued to develop even after the 2008 crash.

The 49-year-old Bryant, who resembles a cereal box character himself with his wide eyes, toothy smile, and elongated chin, blames Kellogg's financial woes on the changing tastes of fickle breakfast eaters. The company flourished in the Baby Boom era, when fathers went off to work and mothers stayed behind to tend to three or four children. For these women, cereal must have been heaven-sent. They could pour everybody a bowl of Corn Flakes, leave a milk carton out, and be done with breakfast, except for the dishes. Now Americans have fewer children. Both parents often work and no longer have time to linger over a serving of Apple Jacks and the local newspaper. Many people grab something on the way to work and devour it in their cars or at their desks while checking e-mail. “For a while, breakfast cereal was convenience food,” says Abigail Carroll, author of Three Squares: The Invention of the American Meal. “But convenience is relative. It's more convenient to grab a breakfast bar, yogurt, a piece of fruit, or a breakfast sandwich at some fast-food place than to eat a bowl of breakfast cereal.” People who still eat breakfast at home favor more laborintensive breakfasts, according to a recent Nielsen survey. They spend more time at the stove, preparing oatmeal (sales were up 3.5 percent in the first half of 2014) and eggs (up 7 percent last year). They're putting their toasters to work, heating up frozen waffles, French toast, and pancakes (sales of these foods were up 4.5 percent in the last five years). This last inclination should be helping Kellogg: It owns Eggo frozen waffles. But Eggo sales weren't enough to offset its slumping U.S. cereal numbers. “There has just been a massive fragmentation of the breakfast occasion,” says Julian Mellentin, director of food analysis at research firm New Nutrition Business. And Kellogg faces a more ominous trend at the table. As Americans become more healthconscious, they're shying away from the kind of processed food baked in Kellogg's four U.S. cereal factories. They tend to be averse to carbohydrates, which is a problem for a company selling cereal derived from corn, oats, and rice. “They basically have a carb-heavy portfolio,” says Robert Dickerson, senior packagedfood analyst at Consumer Edge. If such discerning shoppers still eat cereal, they prefer the gluten-free kind, sales of which are up 22 percent, according to Nielsen. There's also growing suspicion of packagedfood companies that fill their products with genetically modified organisms (GMOs). For these breakfast eaters, Tony the Tiger and Toucan Sam may seem less like friendly childhood avatars and more like malevolent sugar traffickers.

In the chapters that follow, we will see, and repeatedly, how the investing public is fascinated and captured by the great financial mind. That fascination derives, in turn, from the scale of the financial operations and the feeling that, with so much money involved, the mental resources behind them cannot be less. Only

Unlike other financial securities, such as shares of IBM stock or oil futures, a credit derivative is not even some theoretical value of a tangible good. It’s the perceived value of a complete intangible, the perception of the probability of meeting some future obligation.

The usual place to stand is in the existing set of constraints, issues, and opportunities that confront the organization…. Using this approach, managers typically conduct a financial and organizational analysis, identify what opportunities and threats exist, what strengths and weaknesses the organization has, and then formulate a strategy that is intended to exploit the opportunities and minimize or eliminate the threats…. The boat is patched but it is still the same boat and most likely will only continue on the old course at about the same velocity or a little faster…. Our recommended approach is to stand in a future that is not directly derived from present conditions and circumstances…. Although the future is informed by the past, it is as “past-free” as possible…. When I say the future is “past-free,” I mean that the future should not be an extrapolation, extension, or modification of the past.

Because they are all derived from the value of underlying assets, all futures contracts are forms of ‘derivative’.

that the plumbing of the derivatives business was hopelessly obsolete. Greenspan later called it a twenty-first-century industry reliant on nineteenth-century practices.

Creativity was channeled into manipulation rather than innovation, and the result has been a veritable parade of financial bubbles: the housing­price bubble, its partner the mortgage securities bubble, and the overall derivatives bubble.

Still, one could argue—and many did—that Greenspan, at least, had no business being quite so shocked. Over the years, countless people had challenged his deregulatory dogma, including (to name just a few) Joseph Stiglitz and Paul Krugman, both Nobel Prize–winning economists, and Brooksley Born, who was head of the Commodity Futures Trading Commission from 1996 to 1999. Born eventually became something of a Cassandra figure for the crisis, since she repeatedly called for regulating the market for derivatives, those ultracomplex financial products that eventually helped bring down the economy. Those calls were silenced when Greenspan, along with then-Treasury Secretary Robert Rubin and then-Securities and Exchange Commission Chair Arthur Levitt, took the extraordinary step of convincing Congress to pass legislation forbidding Born’s agency from taking any action for the duration of her term.

Capitalism has become systemically risky when a single financial algorithm like the one that David X. Li created brought the entire global economic system close to collapse in 2008.

How did the West produce the intense world of visual signs? What were the underlying forces that favored the multiplication of signs? It is generally understood that there is close relationship between capitalism and Christianity. Especially through the Protestant Reformation the Christian faith produced a huge shift to the individual, a man or woman separated out before God. Sociologists and historians recognize that by means of this ideological transition the individual no longer existed within a containing order of duties and rights controlling the distribution of wealth. Wealth instead became a marker of individual divine blessing. Thus the Reformation led to the typical figure of the righteous business man, the mill-owner who made big profits during the week and with them endowed a church for giving thanks on Sunday. More recently we have the emergence of the ‘prosperity gospel’ which applies the same basic formula to everyone. As they say in these churches, ‘prayed for and paid for’, neatly chiming relationship to God and personal financial success. Thus Christianity has underpinned the multiplication of material wealth for individuals. But a consequence of this is the thickening of the world of signs. Prosperity is a sign of God’s favor, and this is shown, signified, by the actual goods, the houses, clothes, cars, etc. Against this metaphysical background, however, the goods very quickly attain their own social value and produce the well-known contours of the consumer world. Once they were declared divinely willed and good they could act as self-referential signs in and for themselves. People don’t have to give any thought to theological justification to derive meaning from the latest car model, from the good-life associations of household items, refrigerators, fitted kitchens, plasma T.V.s, and now from the plugged-in cool of the digital world, computers, cell phones, iPods, G.P.S. and so on. So it is that our Western culture has developed a class of signs with a powerful inner content of validated desire. You

Curbing the financial sector. Since so much of the increase in inequality is associated with the excesses of the financial sector, it is a natural place to begin a reform program. Dodd-Frank is a start, but only a start. Here are six further reforms that are urgent: (a) Curb excessive risk taking and the too-big-to-fail and too-interconnected-to-fail financial institutions; they’re a lethal combination that has led to the repeated bailouts that have marked the last thirty years. Restrictions on leverage and liquidity are key, for the banks somehow believe that they can create resources out of thin air by the magic of leverage. It can’t be done. What they create is risk and volatility.2 (b) Make banks more transparent, especially in their treatment of over-the-counter derivatives, which should be much more tightly restricted and should not be underwritten by government-insured financial institutions. Taxpayers should not be backing up these risky products, no matter whether we think of them as insurance, gambling instruments, or, as Warren Buffett put it, financial weapons of mass destruction.3 (c) Make the banks and credit card companies more competitive and ensure that they act competitively. We have the technology to create an efficient electronics payment mechanism for the twenty-first century, but we have a banking system that is determined to maintain a credit and debit card system that not only exploits consumers but imposes large fees on merchants for every transaction. (d) Make it more difficult for banks to engage in predatory lending and abusive credit card practices, including by putting stricter limits on usury (excessively high interest rates). (e) Curb the bonuses that encourage excessive risk taking and shortsighted behavior. (f) Close down the offshore banking centers (and their onshore counterparts) that have been so successful both at circumventing regulations and at promoting tax evasion and avoidance. There is no good reason that so much finance goes on in the Cayman Islands; there is nothing about it or its climate that makes it so conducive to banking. It exists for one reason only: circumvention. Many

AIG’s Financial Products subsidiary (AIG FP), where its mammoth CDS business was housed, managed to get itself regulated by the Office of Thrift Supervision (OTS) because the corporate parent company had acquired a few small savings banks. Savings banks? Aren’t those the stodgy thrift institutions on the corner that take savings deposits and grant mortgages to homeowners? Seems like a funny place to lodge one of the world’s largest derivatives operations. Well, AIG FP was not actually lodged there, but merely lodged there for regulatory purposes. Call it skillful regulatory shopping.

The opportunity to develop competencies may be handed to us in the form of a crisis, as was the case with Brooksley Born, the first female president of the Law Review at Stanford, the first female to finish at the top of the class and an expert in commodities and futures. Charged with the oversight of the U.S. government’s Commodity Futures Trading Commission (CFTC) by the Clinton Administration, Born could foresee what would happen if there wasn’t more regulatory oversight in the multitrillion dollar derivatives markets. Yet no one in government or in the financial markets would listen; in 2008 alone, the U.S. market lost about $8 trillion in value. She has since been dubbed the “Credit Crisis Cassandra.” In Greek mythology, Cassandra was given both the gift of seeing the future and the curse of having no one believe her predictions. In the case of Brooksley Born, the attacks by very powerful people were harsh and unrelenting. She was right, while those around her were gravely wrong. Yet, when I listen to Born and read her interviews, there is no anger, no recrimination in her voice, only grace. Brooksley Born never would have chosen this situation. She recounts waking in a cold sweat many a night. She has learned from her trial by fire and we can learn from her. Sometimes we set out to develop competencies, sometimes we don’t. Either way, if we do something enough, we are likely to get good at it. As poet Emily Dickinson wrote, Luck is not chance— It’s toil— Fortune’s expensive smile Is earned.

Take Brooksley Born, former chair of the Commodity Futures Trading Commission (CFTC), who waged an unsuccessful campaign to regulate the multitrillion-dollar derivatives market. Soon after the Clinton administration asked her to take the reins of the CFTC, a regulatory backwater, she became aware of the over-the-counter (OTC) derivatives market, a rapidly expanding and opaque market, which she attempted to regulate. According to a PBS Frontline special: "Her attempts to regulate derivatives ran into fierce resistance from then-Fed Chairman Alan Greenspan, then-Treasury Secretary Robert Rubin, and then-Deputy Treasury Secretary Larry Summers, who prevailed upon Congress to stop Born and limit future regulation." Put more directly by New York Times reporter Timothy O'Brien, "they ... shut her up and shut her down." Mind you, Born was no dummy. She was the first female president of the Stanford Law Review, the first woman to finish at the top of the class, and an expert in commodities and futures. But because a trio of people who were literally en-titled decided they knew what was best for the market, they dismissed her call for regulation, a dismissal that triggered the financial collapse of 2008. To be fair to Greenspan et al., their resistance was not surprising. According to psychologists Hillel Einhorn and Robin Hogarth, "we [as human beings] are prone to search only for confirming evidence, and ignore disconfirming evidence." In the case of Born, it was the '90s, the markets were doing well, and the country was prospering; it's easy to see why the powerful troika rejected her disconfirming views. Throw in the fact that the disconcerting evidence was coming from a "disconfirming" person (i.e., a woman), and they were even more likely to disregard the data. In the aftermath, Arthur Levitt, former chairman of the SEC, said, "If she just would have gotten to know us... maybe it would have gone a different way."12 Born quotes Michael Greenberg, the director of the CFTC under her, as saying, "They say you weren't a team player, but I never saw them issue you a uniform." We like ideas and people that fit into our world-view, but there is tremendous value in finding room for those that don't. According to Paul Carlile and Clayton Christensen, "It is only when an anomaly is identified—an outcome for which a theory can't account that an opportunity to improve theory occurs."13 One of the ways you'll know you are coming up against an anomaly is if you find yourself annoyed, defensive, even dismissive, of a person, or his idea.

We should require substantial down payments for borrowers, which would make it harder for some families to become homeowners but would help reduce the risk of the terrible collapses we saw in this crisis. Higher down payment requirements would help serve as shock absorbers for the system—much like capital requirements for financial firms or margin requirements for derivatives investors—limiting the risk of excessive booms by limiting highly leveraged borrowing.

Steve Bannon, for example, is an alt-right hero to the pro-Trump white working class. Bannon rose from Breitbart News editor to running Trump’s victorious 2016 presidential campaign. From there he became Trump’s White House Chief Strategist and Senior Counselor. His politics derive from his father’s experience losing his life savings during the 2008 financial crisis. According to Bannon, the elites (inside and outside American government) who built the global capitalist system emerged from the wreckage unscathed—often even richer—while working-class heroes like his father were decimated. Bannon doesn’t hide his intent: “Lenin wanted to destroy the state, and that’s my goal too. I want to bring everything crashing down, and destroy all of today’s establishment.” These sentiments, more than anything else, explain the Trump phenomenon. For what better vessel is there in the entire world for accomplishing this goal—for bringing everything crashing down—than Donald J. Trump? That’s why Trump’s behavior in office was okay. That’s why his lies about the election are just fine. That’s why the January 6 riot didn’t matter. Not because Trump’s base thinks those things are good for America … but because they know those things are bad for America. Trump has come. And he will go. But what does it say about the underlying state of the American polity that a politician whose central platform is lying about elections is the unrivaled champion of one of the two major political parties? Something broad and deep is afoot. Something pernicious. Something likely to last.

The British Empires conversion of the vast indigenous economy of North America into aristocratic property provides an illuminating paralell, in fact, for a company like Amazon, whose trillion dollar market capitalization is derived from the usurpation of a thriving pre existing system of shops, markets, libraries and the like. With their bundles of patents and global monopolies, twenty-first-centruy tech conglomerates have swelled to the scale of eighteenth century trading companies and with a speed quite foreign to the plodding first economy. But they are more than just businesses. Silicon Valley firms have a profound impact on world organization, and key players such as Peter Thiel creates of PayPal, early investor in Facebook, and cofounder of the surveillance company Palantir Technologies possess political power greater than most heads of state. The old caveats apply once more. First, the second economy serves elites almost exclusively. Again fit is chiefly financialized, and building financial instruments remains the preserve of the rich. 84 percent of corporate stock is owned by the wealthiest 10 percent. But even this decile is largely denied access to the heart of the second economy. Some 80 percent of Facebook stock. worth over half a trillion dollars is owned by 25 individuals and institutions, though Mark Zuckerberg retains only 28 percent of the company, this includes a vital 60 percent of the Class B voting shares. Since Facebook is an entity comparable in scale to a nation state, and serves some of the same functions, this determination not to share political power is instructive. Valuations of such companies are inflated by their monopolistic nature and by the financial institutions that control them to the point of total departure form the first economy. This fall, during the most serious economic recession since the 1930s, the values of Tesla, Amazon and Facebook all hit record stock-market highs

Under the new regime, the financial sector has become much more profitable than the non-financial sector, which had not always been the case.16 This has enabled it to offer salaries and bonuses that are much higher than those offered by other sectors, attracting the brightest people, regardless of the subjects they studied in universities. Unfortunately, this leads to a misallocation of talents, as people who would be a lot more productive in other professions – engineering, chemistry and what not – are busy trading derivatives or building mathematical models for their pricing. It also means that a lot of higher-educational spending has been wasted, as many people are not using the skills they were originally trained for.

Derivatives spread the damage throughout the world. In March 2009, when the S&P 500 had fallen 57 percent from its peak, I could not tell whether to buy stocks or to sell what I had. Either decision might have been a disaster. If we continued into a major worldwide depression, buying more would be costly. In the other scenario, the one that occurred, this was the bottom, and stocks rebounded over 70 percent in less than a year. Warren Buffett, who had better information and insight than almost anyone, later told The Wall Street Journal’s Scott Patterson that at one point he was looking into the abyss and considering the possibility that everything could go down, even Berkshire Hathaway. It was only when the US government indicated it would do whatever was necessary to bail out the financial system that he realized we were saved.

Again, here’s the standard definition: A derivative is a financial instrument whose value is linked to, or derived from, some other security, such as a stock or bond. For example, you could buy IBM stock; alternatively, you could buy a “call option” on IBM stock, which gives you the right to buy IBM stock at a certain time and price. A call option is a derivative because the value of the call option is “derived” from the value of the underlying IBM stock. If the price of IBM stock goes up, the value of the call option goes up, and vice versa. Most

Options and forwards are traded on all kinds of financial instruments, including stocks, bonds, and various market indices. Some are traded on organized exchanges throughout the world. Others are traded only in privately negotiated transactions, called over-the-counter, or OTC. Exchange-traded derivatives are more highly regulated, more liquid, and more dependable than OTC derivatives. To get information about an exchange-traded derivative, you can simply look in the Wall Street Journal or call a broker. In contrast, you might never be able to discover certain information about an OTC derivative unless you worked in the derivatives group at an investment bank.

DPG needed a little magic, and some financial alchemy, to create the new derivatives. The first trick was to split the Ajustabonos into two pieces. The most basic way to do this was to form a new company to buy the Ajustabonos and then have the company issue two new securities linked to the Ajustabonos. To create such a company without incurring the wrath of Mexican and U.S. regulators, Morgan Stanley looked to sunny Bermuda. Bermuda was known as a haven for all kinds of dysfunctional financial behavior and money laundering, first by drug dealers, then by the Mafia, and last by investment banks, including Morgan Stanley. Getting into bed with Drexel in the 1980s had pushed Morgan Stanley down a slippery slope. Now the firm was operating in Bermuda and behaving like the mob. Bermuda would protect DPG, but only at a price, and DPG had to play by Bermuda’s rules. First, Morgan Stanley hired several politically connected Bermuda lawyers to incorporate a special Bermuda company. These lawyers would serve on the company’s board of directors and provide crucial political contacts while the company was issuing its special bonds. Next, to avoid negative tax consequences, Morgan Stanley needed to find an appropriate charitable institution to purchase the company’s stock.

In a conference call, P&G’s chief financial officer, Erik Nelson, told analysts the complexity of the swaps violated P&G’s derivatives policy. He contended that the company’s policy calls for “plain vanilla-type swaps” and that “there are no other swaps of this type in our portfolio and there never will be again.” It wasn’t clear who, if anyone, at P&G was responsible for the loss. P&G treasurer Raymond Mains, who had been in charge of the derivatives portfolio, was quietly moved from the treasurer’s office to a “special assignment.

A few other companies were accused of overexposure to derivatives. David Garrity, an analyst at McDonald & Company, even called the Big Three automakers “basically banks masquerading as manufacturing companies” because of their financing subsidiaries. Chrysler Financial Corporation, a unit of Chrysler, had $1.5 billion of interest rate swaps and $535 million of currency swaps, and parent Chrysler had another $1 billion. Even Goodyear Tire & Rubber Company had a $500 million derivatives portfolio. I wondered who didn’t own derivatives.

Warren Buffett and George Soros eschew derivatives. Hedge fund managers bet against the Wall Street banks that develop complex products. The best investors – today and yesterday – make money not because they understand abstruse mathematical models, but because they have a deep intuition about the timing and machinations of financial markets. Markets have been complex for a long time, and their ebbs and flows always have depended, not only on intricate disclosures about assets and liabilities, but also on human psychology. That has not changed since the 1920s.

In 2011, just four Wall Street banks—JPMorgan Chase, Citigroup, Bank of America, and Goldman Sachs—accounted for 95 percent of the financial industry’s derivatives trading in the United States.34 It is a pattern of concentration that prevails in many other industries too, from media and computing to telecoms and supermarkets. Anyone who has played the board game Monopoly is well versed in the dynamics of Success to the Successful: players who are lucky enough to land on expensive properties early in the game can buy them up, build hotels, and reap vast rents from their fellow players, thus accumulating a winning fortune as they bankrupt the rest. Fascinatingly, however, the game was originally called ‘The Landlord’s Game’ and was designed precisely to reveal the injustice arising out of such concentrated property ownership, not to celebrate it.

On a simple level, derivatives are financial products whose value is linked to an underlying set of assets. Derivatives can help businesses smooth out price fluctuations. For example, if a company wants to protect itself from a fall in a commodity price, it could buy a kind of derivative called a forward contract, which allows it to sell at a fixed price in the future.

The economy and financial markets are becoming global, while monetary policy and financial supervision and regulation are conducted at the country level by national authorities. This is what the sovereign state is all about. For the foreseeable future, it is unrealistic to imagine that the authorities in large countries will conduct monetary policy or financial supervision and regulation for the sake of global stability. The gap between the reality of the global economy and the policy-making institutions is the essential source of the problem we are faced with for many decades to come. Most problems derive from the fact that (1) central banks lack the incentive to 'internalize' the international spillover from their own conduct of monetary policy, (2) there is no global lender of last resort that is really worthy of that title, and (3) financial institutions tend to consume the services of financial stability excessively by not internalizing the impact of their own behavior on financial stability - the 'tragedy of the commons.

Dr. Ferris smiled. “No private businessman or greedy industrialist would have financed Project X,” he said softly, in the tone of an idle, informal discussion. “He couldn’t have afforded it. It’s an enormous investment, with no prospect of material gain. What profit could he expect from it? There are no profits henceforth to be derived from that farm.” He pointed at the dark strip in the distance. “But, as you have so well observed, Project X had to be a non-profit venture. Contrary to a business firm, the State Science Institute had no trouble in obtaining funds for the Project. You have not heard of the Institute having any financial difficulties in the past two years, have you? And it used to be such a problem—getting them to vote the funds necessary for the advancement of science. They always demanded gadgets for their cash, as you used to say. Well, here was a gadget which some people in power could fully appreciate. They got the others to vote for it. It wasn’t difficult. In fact, a great many of those others felt safe in voting money for a project that was secret— they felt certain it was important, since they were not considered important enough to be let in on it. There were, of course, a few skeptics and doubters. But they gave in when they were reminded that the head of the State Science Institute was Dr. Robert Stadler—whose judgment and integrity they could not doubt.

I could not respect how he functioned so completely immersed in the structures of his professional micro-universe. Yes, I too had previously derived comfort from my firm's exhortations to focus intensely on work, but now I saw that in this constant striving to realize a financial future, no thought was given to the critical personal and political issues that affect one's emotional present.

Today eighty people hold the same amount of wealth as the world’s 3.6 billion poorest, and the combined wealth of the richest 1 percent will soon overtake that of the other 99 percent.7 Many in this group of super-elites are financiers. This development has been exacerbated by the fact that the wealthy can capitalize on returns on ownership rather than solely on labor, a practice known as “rent-seeking.” In other words, they can let their money work for them, and over time these investments yield a higher rate of return than the economy’s rate of growth. In contrast, salaries derived from labor don’t rise as quickly as the returns on capital.8

Money does not occur in nature, says the historian Jack Weatherford. Jules Renard, the nineteenth-century French writer, put it another way: 'I finally know what distinguishes man from the other beasts: financial worries. The first forms of money were commodity money, ranging from salt to tobacco, coconuts to rice, reindeer to buffaloes. The English word 'salary' derives from the Latin salarius, meaning of salt. (Roman soldiers were perhaps paid in salt, to flavour their otherwise bland food.)" ( Peter Watson, Ideas: A history of thought and invention, from fire to Freud, page 71).

The Commodity Futures Modernization Act of 2000 -- buried in an 11,000-page budget bill and never debated -- was passed the night before Congress recessed for Christmas in December 2000. It exempted credit-default swaps from federal oversight and from state gambling laws.

What draws ants to even the most remote sugar crystals? What entices bees to flowers? It's the fundamental code of life. Hunger is a taste of yearning your life code carries that, when seated into a human body, translates into mental and bodily desires. In the short term, within a single life, childhood limitations or arousals sow the majority of the seeds of desire. Most human goals frequently revolve around good food, good clothing, intimacy, artistic/scientific expression, and financial success. Across multiple lifetimes, it all ties back to our underlying evolutionary hunger. That is why some of our dreams are unexpectedly different from our waking life goals. That is why siblings born from the same parents, nurtured similarly, have weirdly different life goals - they are two different manifestations of two different derivative codes. This multi-life journey, when unaware, is exactly what we attribute to destiny, and when a little aware, we attribute to Karma. Once these little tributaries are done with their own little flow, they flow back to the original river. In the grand existential scheme, as temporary and evolutionary desires are satisfied, we flow back with the current of existential hunger. This cosmic hunger is more of playfulness than a hunger, simply consciousness, with minimal interference from senses or other impurities, being drawn towards matter, like a playful snake chasing its own tail. Yes, it might be perplexing to our worldly mind. You remember the symbol Ying Yang? The dark dot is the matter in consciousness, and the white dot is the consciousness in Matter - like a lover playfully chasing their loved one. It's a merging of the two fundamental ingredients of existence. Spirituality strives us to ride the original current, fulfilling and freeing us from temporary desires, allowing us to become one with that primordial life code. That is why a Buddha's desires can be attributed to the desires of existence itself. Life, in its microcosm, is complex enough, let alone the macro one.

And yet it was important that Zachary be squished. The kid had been given his own practice room, a cubicle space lined with eggshell foam and scattered with more guitars than Katz had owned in 30 years. Already, for pure technique, to judge from what Katz had overheard in his comings and goings, the kid was a more hotdog soloist than Katz had ever been or ever would be. But so where a hundred thousand other American highschool boys. So what? Rather than thwarting his father's vicarious rock ambitions by pursuing entomology or interesting himself in financial derivatives, Zachery dutifully aped Jimi Hendrix. Somewhere there had been a failure of imagination.

(NCDEX) is an online commodity exchange which provides a commodity exchange platform for derivatives. It was incorporated on 23 April 2003 under the Companies Act, 1956 and obtained its Certificate for Commencement of Business on 9 May 2003. It’s a public company and it commenced operations on 15 December 2003.

Hi Celestials Here is a Topic Why do some guys derive joy in spending huge amount of money buying free drinks, for their friends, but can't help or support them? A very sensitive question I couldn't ignore. I've seen this questions in couple of places and now it has been directed specifically to me. I 'm sure you must have come across this scenario or probably been a victim. Someone you've known for long, a childhood friend or colleague hits the jackpot. He excitedly called for celebration, spending a fortune on foods and drinks. Intact he's ready to close down the restaurant that night, but behind close doors, you've been asking him for a little financial assistance to boost your business or start up something, but he keeps giving excuses. After having so much thoughts about this, I only came up with one conclusion. And that is the fact life is partly competition, at least that is how some folks views it. The bitter truth is that Nobody wants you to be greater than they are except your parents. Everybody wants to be ahead. I call them dream wreckers. They would rather watch your dream die, than assist you. They prefer receiving accolades in public for feeding the whole community with foods and beer, than changing someone's destiny. Because it boost their Ego. Depend on them at your own peril. That's why bible said that you need to be pitied if you still put your hopes on mere mortal. You will be shocked by the high level of disappointment. Just be focused, persistent, and do the little you within your reach, then pray for grace. When the time comes, your destiny helper will locate you, and you will know he's the one because he won't feel burdened assisting you.

We shouldn’t have been so dismissive of the general concern about derivatives just because we had issues with her remedies.

it weakened the already limited oversight of derivatives.

The Real Problem Most people do not know that the real estate crash was not really a real estate crash. Poor people did not cause the real estate crash. The rich caused the real estate crash. The rich created financially-engineered products known as derivatives—products Warren Buffett has called “weapons of mass financial destruction.” When the financial weapons of mass destruction started to explode, the real estate market crashed… and poor, subprime borrowers were blamed.

But it was hard to find these: few of the human financiers involved in debt, derivatives, or securitization world wanted to be quoted or photographed, and it was almost impossible to see the human borrowers at the end of the complex financial chains.

When I left the State Department, I was flattered by offers of top positions in major corporations, most of them in the financial world. The monetary rewards were stunning and the work not terribly demanding. I was told I didn’t need to know anything about banking, finance, or exotic financial instruments like hedge funds and derivatives. Experts would be present to help me. One investment bank pressed me hard, repeatedly upping the money and the title. The offers were definitely tempting. I understood the financial and social value of these positions. But my instincts said no. Did they want me for what I could do for them? Or did they want me for the celebrity I could bring them? My instincts said I would mostly be a door opener and a dinner host.

It is possible to see here again the constants in these matters. Associated with the wealth of the Banque Royale, Law was a genius—intelligence, as ever, derived from association with money. When the wealth dissolved and disappeared, he was a fugitive mercilessly reviled.

The European Union proposes a financial transaction tax of 0.1% on securities and 0.01% on derivatives, which would be effective on transactions where at least one party is in the Eurozone.  It is probably the major reason that the super-rich who control Britain’s media and politics, fearing its effect and probable extension, promoted Brexit.

The global financial crisis was caused by excesses of the liberal system of regulations and the belief that a completely free market will allow enormous innovation and allocate capital to the most profitable enterprises with the highest returns. Once the Federal Reserve Chairman decided it was not necessary to regulate derivatives and supervise them, the fuse was lit. Once you find that you can mash up a lot of good and bad assets in one bundle and pass on your risk all around Europe and other parts of the world, you have started something like a Ponzi scheme which must come to an end sometime…The business of a person in a financial institution is to make the biggest profit for himself, so just condemning the bankers and the profit takers does not make sense. You have allowed these rules, and they work within these rules.

Since The Great Recession, the global financial crash of 2008-09, the debt-fuelled post-recession recovery has been the weakest in the post-war era (since the end of World War Two). Whereas total outstanding credit in the US after the Wall Street Crash grew from 160% to 260% of GDP between 1929 and 1932, the figure rose from 365% in 2008 to 540% in 2010. (And this does not include derivatives, whose nominal outstanding value is at least four times GDP).[34] A long depression and rising right-wing populism have followed, including the stunning ascendency of property tycoon and TV celebrity demagogue Donald Trump as the President of the US in 2016.[35] The British public’s vote in June 2016 to leave the EU delivered another shock of global significance. A chronic drift towards trade wars and protectionism is accelerating and in January 2018, US Defence Secretary Jim Mattis said that “great power competition, not terrorism, is now the primary focus of US national security”, putting Russia, China and – yes – Europe in the crosshairs of the world’s long-time dominant economic and military power. Adding to this age of anxiety is the accelerating automation revolution. What should be an emancipatory and utopian development only generates insecurity at the prospect of unprecedented mass unemployment. It can be no coincidence that all these crises are converging at exactly the same time. They cannot be explained away by cynical and shallow generalisations about ‘human nature’. In the course of this investigation we will see that in fact all of these crises have a common root cause: the decaying nature of capitalism and its tendency towards breakdown. Indeed, average Gross Domestic Product (GDP) growth rates in the world’s richest countries have fallen in every decade since the 1960s and are clearly closing in on zero. Rates of profit, manufacturing costs and commodity prices are also trending towards zero. Drawing on Henryk Grossman’s vital clarification of Karl Marx’s methodology, we shall see that capitalism is heading inexorably towards a final, insurmountable breakdown that is destined to strike much earlier than a zero rate of profit. Indeed, we shall also see that the next, imminent economic crash will result in worldwide hyperinflation. We will also show that the economic crisis is intensifying competition between nation-states, forcing them into a situation which threatens the most destructive world war to date.

With financial markets deregulated and allowed back to their gambling-addictions, new derivative investments were being packaged with inflated, unrated sub-prime mortgages. Because they were pre-destined to crash, it provided the perfect setup to profit at the expense of cheating the public out of billions. It was a turning point in the 21st Century for the public to see that something was very unfair with the system. “Self” regulating banks and investment dealers packaged up junk mortgage-backed investments and dumped them on an unsuspecting public. The crash nearly brought the world economy to a halt, causing government to step in, and save the very people who caused the collapse.

Disinformation is false information spread deliberately to deceive.This is a subset of misinformation, which also may be unintentional. The English word disinformation is a loose translation of the Russian dezinformatsiya,[derived from the title of a KGB black propaganda department. Joseph Stalin coined the term, giving it a French-sounding name to claim it had a Western origin. Russian use began with a "special disinformation office" in 1923.[Disinformation was defined in Great Soviet Encyclopedia (1952) as "false information with the intention to deceive public opinion”. Wikipedia

Trick #1 for Farming Humans is the ability to invisibly commit crime. Chapter 1, Page 9, Ring of Gyges Trick #2 for Farming Humans is to allow professionals to create rigged systems or self serving social constructs. Chapter 4, page 28 (Lawyers who serve corporate interests are often incentivized to assist in harming the society to increase their own security. SEC, Bernie Madoff, Corporations as invisible friends, Money laundering assistance) Trick #3 in Farming Humans is making it legal for insider manipulation of public markets for private gain. (Boeing CEO) page 32 Trick #4 for Farming Humans is Justice prefers to look only down…rarely up towards power. Chapter 5, page 33. Trick #5 for Farming Humans is “let us create the nation’s money”. What could go wrong? Found in Chapter 7 on page 38. Trick # 6 in the game of Farming Humans, to create something which gives a few men an elevated status above the rest. Southern Pacific Railroad taxes, to Pacific Gas and Electric deadly California fires, to Boeing aircraft casualties. Paper “persons” cannot be arrested or jailed. Trick #7 for Farming Humans is a private game of money creation which secretly “borrowed” on the credit backing of the public. Chapter 9, page 51. Federal Reserve. Trick #8 for Farming Humans is seen in the removal of the gold backing of US dollars for global trading partners, a second default of the promises behind the dollar. (1971) Chapter 15, page 81 Trick #9 for Farming Humans is being able to sell out the public trust, over and over again. Supreme Court rules that money equals speech. Chapter 16, page 91. Trick #10 for Farming Humans is Clinton repeals Glass Steagall, letting banks gamble America into yet another financial collapse. Chapter 17, page 93. Trick #11 for Farming Humans is when money is allowed to buy politics. Citizens United, super PAC’s can spend unlimited money during campaigns. Chapter 18, page 97. Trick #12 for Farming Humans is the Derivative Revolution. Making it up with lawyers and papers in a continual game of “lets pretend”. Chapter 19, page 105. Trick #13 for Farming Humans is allowing dis-information to infect society. Chapter 20, page 109. Trick #14 for Farming Humans is substitution of an “advisor”, for what investors think is an “adviser”. Confused yet? The clever “vowel movement” adds billions in profits, while farming investors. Trick #15 for Farming Humans is when privately-hired rental-cops are allowed to lawfully regulate an industry, the public gets abused. Investments, SEC, FDA, FAA etc. Chapter 15, page 122 Trick #16 for Farming Humans is the layer of industry “self regulators”, your second army of people paid to “gaslight” the public into thinking they are protected.

Most bank loans are not to create new means of production but are made against real estate, financial securities or other assets already in place. The main source of gain for borrowers since the 1980s has not derived from earnings but seeing the real estate, stocks or bonds they have bought on credit rise as a result of asset-price inflation – that is, to get rich from the debt-leveraged Bubble Economy.

Katz lists 8 different kinds of quality. From each, we derive general quality criteria against which any result can be measured. Type of Quality Criterion Description Results - Dimension Functional Quality The level of function, over time, at consistent performance and without problems Operations Structural Quality Durability and resistance to tear & wear of the components of which the item is made of R&D, Operations "Scientific" Quality (Methodological and Didactic) The level of adherence to the governing model / standard / theory / teaching / accepted professional criteria R&D Resultant Quality The level by which the action leads to the desired result Management Perceived Quality The level by which the object is perceived as having desired characteristics Marketing Aesthetic Quality The level by which the appearance / manifestation of the object (color, shape etc.) is considered pleasing Marketing Human Quality The level by which behavior is perceived / accepted as consistent of declared or implied values HR Financial Quality The level by which the result contributes to the preservation and growth of resources Financial When a goal is defined, it can be examined in relation to each one of the quality criteria.