[Warlord]

Credit derivatives are nothing but a means to transfer default risk. The problem is not “credit derivatives,” but the failure of institutions to manage adequately exposure to such risk. Credit derivatives in and of themselves are essential to modern financial economics.

You should carefully evaluate the "lessons" that you pass along. As a matter of general principle, please consider (and pray about) the proposition that pitchfork populism is a deadly as thoughtless elitism. "Mainstreet" and the farm contributed mightily to the problem by devouring loans that they could not service.

[palmer]

Credit derivatives in and of themselves are essential to modern financial economics.

I would change "essential" to "fatal". By transferring risk from the assets and payment streams that underlie the original securities to a complex scheme of insurance and arbitrage, they make it impossible to estimate and therefore manage risk.

[politicket]

The problem is not “credit derivatives,” but the failure of institutions to manage adequately exposure to such risk. Credit derivatives in and of themselves are essential to modern financial economics.

I completely agree with you. This current economic problem is based on the greed of the entities that wielded otherwise useful tools very, very unwisely - and past a danger point.

My intent in these lessons is not to cast down credit derivatives - it is to educate the public that the issue about to bring down our economy is centered around the great misuse of credit derivatives.

[4Liberty]

As an economist, “shorting stock” transactions seem irrational.

As I heard them explained, you promise to sell someone a stock you don’t yet have - but only if the price is later LOW, when you buy it (to then give to them).

Why wouldn’t the FIRST person simply buy it, at the LOW price you are planning to buy it at?

Why would the first person even MAKE such a deal?

Please explain - thanks.

[bvw]

Bullshit. Not essential.