söndag 17 maj 2009

Myron Scholes, intellectual godfather of the credit default swap, says blow 'em all up

Först ett citat från Webster Tarpley:

"Myron Scholes, the creator of the infamous Black-Scholes model for pricing derivatives which won the Nobel Prize and then almost destroyed the world banking system with the Long Term Capital Management bankruptcy of 1998, has now partially understood that his derivative creations are a Frankenstein monster. He recommends wiping out the current crop of toxic CDS derivatives. The only hope of world economic recovery is indeed by wiping out, freezing, deleting, shredding, and otherwise destroying ALL of the $1.5 quadrillion derivatives bubble.

Otherwise, the London G-20 will repeat the failure of the June 1932 Lausanne Conference, which needed to wipe out reparations and war debts left over from World War I in order to end the First World Depression. To end the Second World Depression, wipe out and permanently ban derivatives now! "

Sedan Mr Scholes himself i denna Times artikel:

Myron Scholes, intellectual godfather of the credit default swap, says blow 'em all up
Myron Scholes, whose Black-Scholes option pricing model provided the intellectual underpinning for modern derivatives markets, thinks one particular derivatives market—that for credit default swaps—is due for a Red Adair style rescue. Or a Fred Adair style rescue.
Red Adair put out oil well fires by setting off gigantic explosions at the wellhead. "My belief is that the Fred Adair solution is to blow up or burn the OTC market in credit default swaps," Scholes said this morning. What that means, he elaborated, is that regulators should "try to close all contracts at mid-market prices" and then start up the market anew with clearer rules and shorter-duration contracts.


The G-20 leaders must deliberate a new set of policies capable of leading humanity out of
the current crisis. We must first identify the immediate cause which has detonated the
present unprecedented turbulence. That cause is unquestionably the $1.5 quadrillion
derivatives bubble
. Derivatives have provoked the downfall of Bear Stearns, Countrywide, Northern Rock, Lehman Brothers, AIG, Merrill Lynch, and Wachovia, and most other institutions which have succumbed. Derivatives have made J.P. Morgan Chase, Bank of America, Citibank, Wells Fargo, Bank of New York Mellon, Deutsche Bank, Société Générale, Barclays, RBS, and money center banks of the world into Zombie Banks.

Derivatives are financial instruments based on other financial instruments – paper based
on paper. Derivatives are one giant step away from the world of production and consumption, plant and equipment, wages and employment in the production of tangible physical wealth or hard commodities. In the present hysteria of the globalized financial oligarchy, the very term of “derivative” has become taboo: commentators prefer to speak of toxic assets, complex securities, exotic instruments, and counterparty arrangements. At the time of the Bear Stearns bankruptcy, Bernanke warned against “chaotic unwinding.”

All of these code words are signals that derivatives are being talked about. Derivatives
include such exchange traded speculative instruments as options and futures; beyond
these are the over-the-counter derivatives, structured notes, and designer derivatives.
Derivatives include the credit default swaps so prominent in the fall of AIG, collateralized debt obligations, structured investment vehicles, asset-backed securities, mortgage backed securities, auction rate securities, and a myriad of other toxic variations. These derivatives, in turn, are pyramided one on top of the other, thus creating a house of cards reaching into interplanetary space.


We do the Zombie bank

Svenska Riksbankens pris (eller som det så försåtligt heter Nobel priset i Ekonomi) har stor skuld i denna världens hitintills värsta finanskris:

Ceteris Paribus

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