Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Pastimes : Clown-Free Zone... sorry, no clowns allowed -- Ignore unavailable to you. Want to Upgrade?

To: At_The_Ask who wrote (207222)	11/28/2002 11:14:54 PM
From: Oblomov	Read Replies (1) \| Respond to of 436258

I do think that the Fed (and the agencies of the US government) massage things a bit. But, I think that the greatest crime has occurred right in the open. Namely, the idea that "a little inflation is a good thing" has been routinely expressed by Fed Governors and media personalities. And a target inflation rate of 2-3% certainly has seemed to be the goal of the Fed under Greenspan. Still, I don't think that the financial system is as unstable as some of these guys make it out to be. JPM may hold derivatives with a notional value of $7T, but most of these are swaps, options on swaps, lease options, etc. For the most part, they are not OTC derivatives. There may be some systemic risk, but the risks taken in dervatives largely cancel out risks taken on other assets. For example, to reduce the risk taken in holding Brazilian sovereign debt, a JPM might buy a swap that trades the income stream of the Brazil sovereign for US treasury debt. The notional value is huge, but they hold assets underlying the options. This is not to say that there can't, or won't be big financial blowups in the future. In fact, I'm confident there will be.