Frontline TV Program last night

Miscellaneous Current Events
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Last night a Frontline TV program ran a PBS special on how the Over the Counter Derivatives market caused the Dot Com crash and the financial crash of 2008. The program showed how a lady gov’t regulator was hot on the trail of this issue back in 1996/97 and how Greenspan and Clinton appointee’s thwarted her efforts. The program concluded with “only if we would have regulated the industry back then we could have avoided the current financial crises.”

Never any mention of the Feds role. A deflection of the truth if you ask me but I would like to know if Peter Schiff or any prominent Austrian economist (I am an Austrian novice) has commented on this anywhere and if there is a link to it.

If you haven’t seen the episode I found it at this link. I hope it is ok to post this.

http://markschinablog.blogspot.com/2009/10/frontline-otc-derivatives.html

Thank you,

John

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Politics is all about deception. The political ideology of the left is “blame selfish private interests.” Derivatives are therefore the obvious thing to blame because they represent the fallibility of private interests. However, as you point out, they conveniently leave out talk of the Fed, even though the Fed is a culmination of private interests fused with government force. The American Left is so intellectually dishonest it makes my head hurt. So this doesn’t surprise me.

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As opposed to the American Right, they’re so intellectually honest.

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Of course, she has it perfectly backwards. If we hadn’t regulated the derivatives market no one would have had much confidence in it and it would have remained small, obscure, and the province of specialists.

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What regulation do you mean? The point in the video was that over the counter derivatives were unregulated.

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I am curious on all viewpoints on this. Without knowing much about it. Perhaps there was too much burdensome regulations on alternatives that push demand toward ‘derivitives’.

But I don’t know. I am posting for the email updates primarily [:)]

Edit:

I watched some of it. What I gathered,

Companies purchased products they did not understand. Essentially, they did not read the contract. Basically, the equivalent of buying a good from a classified. Or, me renting an apartment without reading the contract and I get penalized because I have a company vehicle in the parking lot, own pets, smoke, damage carpet, etc.

I still dont know much about it just things that jumped out to me.

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Opaque and overly complicated derivatives emerged precisely because of regulation. The first Basel accord placed ad hoc and restrictive regulations on the banking system, thus they created innovative and complex financial instruments. Furthermore, there’s nothing wrong with derivatives–the problem arises only when you inflate and create bubbles. Most people who blame/attack derivatives don’t even know what they are. Either way, business cycles are to be explained by economists and theories, not by politicians with political dreams of a nationalized banking system financing their pet projects.

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I never said they were. Different kinds of lies though. Rarely “blame selfish private interests.”

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I know little about derivatives, but I would like to learn more. Does anyone have any good references to read up on this?

This is the first I have heard on the Basel accord - Esuric do you have any reference to an article which defends this assertion?

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I’ve heard this many times from the American Right, whether they do it outright or in a subtle manner, it’s there.

I’ve heard many “Conservatives”, “Neo-Conservatives”, and “Republicans” blame this whole crisis and the ones before on Greed!Greed!Greed! Then when I mention the role of the Federal Reserve, they gawk at me.

Rarely and I mean rarely will you hear the American Right put an overwhelming burden of the blame on the Federal Reserve.

The American Left and American Right really aren’t all that different.