First, the big banks write their own laws. In many cases, our "representatives" don't write the laws and regulations that apply to banks. They may not even read what the lobbyists give them to pass into law. So what if they mandate that 85% of these entities aren't subject to even the suggestion of oversight? It's another meltdown waiting to happen. No sane person would do that, but in the Money Party there's no sanity left.

I predict that in five years the automatic reset to $3 billion will quietly disappear. Assuming we still have an economy and a government in five years.

Second, as the article states, derivatives are a mechanism to displace risk. You can't make risk disappear, you can only shift it onto somebody else.

It's like a ski lodge owner telling people he can help them avoid broken legs by forcing several other people to suffer smaller breaks. Not only is it absurd on its face, it encourages people to take risks they wouldn't otherwise take.

A derivative is one of the worst perversions of capitalism. If you invest money, you're supposed to take the risk yourself. You're supposed to study the investment thoroughly enough to believe that it will succeed. Take away the element of risk, and you shift to investments that give you a higher return, legitimate or not. False wealth accumulates, the bubble bursts, and we're back in the mud. Since you're managed to shift the risk onto others, though, you don't lose anything, and you don't learn anything.

(I have degres in math and computer science, it is not Latin to me.)

1.) $8 billion a year amounts to piffle, trillions are traded daily.

2.) It's essentially a Ponzi scheme dressed up with ill-understood math that is not really applicable to the problem being "solved".

3.) It treats gambling (bets) as though they had some intrinsic value, which is simply wrong. Probabilities are entirely imaginary, and may or may not have any relation to what happens. A good analogy wouild be placing side-bets in a game of craps, and then starting a market in these side-bets.

4.) I have no problem with those limits, it's a start, and it certainly will limit the market in this crap.

5.) High-frequency trading is a similar and equally pernicious and dangerous perversion of math in pursuit of something for nothing in "high finance".

you are wrong on #2 - not close to a Ponzi. No one is recruiting investors to pay off prior investors.

you are wrong on #3 - derivatives have intrinsic value. Airlines buy oil contracts to fuel airplanes for instance.

you are right on #4 in that limits (or margin) should be in effect. Dodd-Frank does this.

you are wrong on #5 - HFT skims pennies but provides valuable liquidity.

for derivatives in order to hedge risks or to insure against calamities. Stock options for example, are derivatives, but the writer of a call option is obligating him- or herself to sell a certain security at a certain price for a specified amount of time in return for receiving a premium (less brokerage commission). The buyer of that option obtains the right to purchase a certain security at a certain price for a specified amount of time in return for paying that premium (plus brokerage commission). So the option itself has an intrinsic 'time value' (the amount of time remaining until the option expires). An option contract is a contract, just like any other enforceable contract.

Meant to elaborate on your post and agree with your reply to Bemildred.

gets to the crux of what I'm attempting to understand.

I can count on one hand the elected officials I have trust in any longer. When I read an article like the one posted, especially the couple of paragraphs highlighted, it seems to me it's business as usual. Nothing has changed. Average
American's like myself that have paid the price, that fell hook, line, and sinker for the BS Hank Paulson sold us so
convincingly are being set-up for the coming economic tsunami.

Most American's don't have that kind of money so are to some degree economically illiterate. I just want to protect my family the best I can with what I have. I no longer invest in the stock market, use a credit union, have no debt and a small mortgage. And yet, my instincts tell me that will not protect us from what's coming.

It's an election year, so don't expect anyone to address these concerns. Just as they made sure the last time the
collapse overlapped the days days bush left office and Obama took over.

Shagman, thanks for posting as much as you did. I trust you have a grasp on as close as I'm going to get to the
truth.

As far as financial arrangements. Mine are similar. The other things one can do lie in the direction of self-sufficiency and building up social connections and barter network.