[lbo-talk] lbo-talk Digest, Vol 1146, Issue 1

brad bauerly bbauerly at gmail.com
Sat Feb 27 12:06:19 PST 2010


I wonder if you could answer a few questions for me Mike related to what Doug said below. I am also struck by the fact that there is still a lot of speculation in derivatives- as Doug mentioned in RMBS and closer to my own research in the Agflation that occurred in 2006-2008.

While trying to write a paper on the food crisis and trying to incorporate the perspective of Bryan and Rafferty I cannot determine if the speculation and the crises/crisis they caused would be a failure of the derivatives markets or the manner through which these forms of what Bryan called them at the SR workshop in Toronto "social derivatives" discipline and displace through crisis. That is, was it a failure of a premature system or was it actually functional to capital as a means to displace the void that had grown between value and asset prices onto labour through rising food prices and potentially rising mortgages/dept. Bryan argued in Toronto that labour had caused the crisis and I assume that he meant by refusing to further subordinate their lives and living standards to the discipline of capital leading to mortgage default and the crisis. However, the immediate result of the crisis appears to be increased capitalist discipline of labour.

Also, any ideas how this type of perspective would view the increase in food and other commodities because of the speculation in commodity futures? Again, is this a failure of derivatives and if so it appears that even when it fails it succeeds by reaping speculative profits and shedding costs onto consumers (it's hedged I guess)?

Brad


> I'm a bit short of time now, but I do want to say something. I met
> Dick at the Socialist Register mini-conference in Toronto the other
> week and found him an interesting guy. For some reason, he thought I
> took some sort of vulgar populist line and thought derivatives in
> particular and finance in general were all a fraud and a waste. Of
> course I don't. But there's a lot of frothy parasitical waste around a
> meaningful core. So with derivatives, yes, they are an attempt to cope
> with uncertainty and volatility. But, there are several buts. One is
> that derivatives are used very selectively - firms exposed to price
> risk on currencies and commodities don't always hedge, because they're
> making market judgments, meaning essentially that they're speculating.
> And the banks the create OTC derivatives bury a lot of opaque crap in
> them - e.g., the mortgage CDOs that blew up not all that long ago.
> Players who think they're hedging or doing something else conservative
> can end up getting hosed. And many derivatives have no rationale other
> than to evade taxes or regulations. So it's a long way from an either/
> or thing.
>
> Doug
>
>
> ------------------------------
>
>



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