A rider was tacked on the latest congressional budget bill by lobbyists from big banks. What the rider does is to make it easier for FDIC banks to trade derivatives, which Warren Buffett once defined as “financial weapons of mass destruction.” (See “Tilting at Hillary,” TIME Magazine, by Rana Foroohar, January 26, 2015, page 28.)
Derivatives may be described as financial instruments that depend on something else for their value. For example, a stock call option is a derivative, because the owner of the option does not own the stock, but the value of the derivative depends wholly on the value of the stock.
Massachusetts Senator Elizabeth Warren gave a “barn-burning” speech on the Senate floor in December in opposition to the rider, but only time will tell whether the rider survives as the bill makes its way through Congress.
Ms. Foroohar’s essay makes other points about other failed economic adventures; e.g., “trickle-down” and turning “to finance to generate quick-hit growth in tough times, deregulating markets or loosening monetary policy rather than focusing on underlying fixes for the real economy. Shrugging and citing a market-knows-best philosophy to avoid difficult political decisions has been a bipartisan exercise for quite a long time now.”
And the ever-increasing gap between rich and poor and wage stagnation? Senator Warren: “Between the 1930’s and the 1970’s, 90% of all workers shared 70% of all income growth. Between 1980 and 2012, guess how much that 90% got? Zero!”
Did you happen to notice…..?