Don’t let journalists

What the fuck is this?

“There is $1.2 quadrillion invested in derivatives alone,” claims the article.

No, no, there absolutely is not. That is so wrong that I can’t even conceive of how anyone could ever get this idea. All these Ivy League-educated journalists who don’t know a damn thing. Shit.

Perhaps Sue Chang is smarter than that and this is the article her editors wanted. I don’t know. But that doesn’t make any of it correct, or improve the veracity of the whole enterprise.

Derivatives to simplify it greatly are investment instruments where certain outcomes lead to “in the money” results, but most do not. So if you count the present value of all derivatives as “in the money” (which is idiotic), you might be able to get to $1.2 quadrillion. But that is just not how derivatives work or what they are for.

Most derivatives produce very little either way. Many lose money as they are hedges — kind of like insurance, but market-based in a direct sense.

Many lose large amounts of money as Long Term Capital Management discovered.

Many derivatives — in fact most of them — you often don’t pay for at all other than some minor transaction fee until you are either in our out of the money on them and then you make good the contract.

Saying there is $1.2 quadrillion invested in derivatives is completely meaningless and that article is wrong and bad and stupid.