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To: Lymond who wrote (34928)	5/23/2000 7:52:00 PM
From: yard_man	Read Replies (1) \| Respond to of 42523

I think if there were more disclosure (thank you Mr. Greenspan) and not less, bankers would be more likely to use these instruments in a legitimate fashion to hedge and a counter-party's ability to make good (under dire situations) would be under scrutiny as well. As it is with no disclosure -- Orange County is going to be repeated at a larger and larger scale ... I think there is due cause to be concerned about impacts to the whole US financial system ...

To: Lymond who wrote (34928)	5/23/2000 8:23:00 PM
From: pater tenebrarum	Read Replies (1) \| Respond to of 42523

John, i agree that derivatives per se won't cause anything. but like you say, a true MCHVE hasn't yet occurred, and what's more, the phenomenal growth of derivatives coincided with a recession-free environment. the very same environment has of course fostered a permissive risk taking attitude generally. that would include the quality of credit, which i am convinced has declined in recent years. even now, with the economy cooking on all cylinders we have extremely high junk bond default rates, which according to S&P are set to rise markedly this year. since you mention the non-financial sector, i believe that the areas of high growth (telecommunications in the broadest sense) have seen their debt levels explode to a rather daunting level...heck, you could say that of the whole private sector, but this one specifically has seen lots of debt based investment in what has become an awfully crowded marketplace. the question is of course, will the margins ultimately be there to support all these ambitious investments? already we have seen a few rather spectacular wrecks, like Iridium...soon to be followed by Globalstar. firms like Global Crossing have seen the pricing for their product deteriorate at enormous speed. there's going to be a big shakeout down the road, and with today's complex markets, the unexpected can probably be expected...<g> in fact i would argue that a true stress test for the system is highly likely to occur at some point.

To: Lymond who wrote (34928)	5/23/2000 9:30:00 PM
From: SBerglowe	Read Replies (2) \| Respond to of 42523

John, What if there was a systemic financial crises caused by currency collapse and a subsequent stampede in gold. Would that not be unsettling to the gold market derivative game, and could that not cause a clamitous scandal as well as financial ruin? Thanks for your thoughts, Susan

To: Lymond who wrote (34928)	5/23/2000 10:09:00 PM
From: LLCF	Respond to of 42523

<The bigger question in my mind is documentation risk, as derivatives do not settle like ordinary cash instruments (i.e, there is tail risk, ala insurance agreements). If this is mishandled, some institutions could obviously falter. But I nevertheless believe, barring an Armageddon scenario, that derivatives per se are unlikely to cause undue stress to the global financial system.> Couldn't agree more, I worked at one of the big 'derriv houses' till a few years ago and they had the credit department all over us... that said, the outstanding notional value is increadible, especially in Europe. Makes it sound nastier than it is. dAK