Survival__ Structuring Prosperity for Yourself and the Nation - Charles George Smith [66]
Where a futures contract or option has simple, transparent features--the contract gives the owner the right to buy shares of stocks or a specified commodities--a complex derivative is designed to be obscure and opaque, offering a facsimile of risk management that actually masks inordinate hidden risk.
Such instruments might include currency swaps and credit default swaps which only those originating the derivative truly understand. This purposeful complexity provided a rationalization for the derivatives to remain unpriced, unlike options and futures contracts which are "marked to market" every trading day on transparent exchanges. Masking their true value, complex derivatives are marked not to market but to fantasy: whatever the holder claims the value to be.
Since no one outside the underwriter can assess the value, the underwriter enters a "game the system" collusion with a ratings firm which then issues a AAA "safe investment" rating on the deceptively risky derivative.
And since there is no market to set the value, such instruments can be claimed as assets even as they approach zero valuation.
By any measure, such instruments are not legitimate risk-management tools; they are purposefully fraudulent from inception and by design, and immensely profitable to the underwriting firm. Thus it is no surprise that some $600 trillion in notational value derivatives have been written and are floating around the global financial system, carrying illusory valuations and endemic risk.
The net result is immense profits for the insiders perpetrating the fraud and the eventual undermining of legitimate credit and risk-assessment and management systems.
Legitimizing the illegitimate necessarily ends up delegitimizing the authentic foundation that the illegitimacy preyed upon. Claiming financial fraud is legitimate delegitimizes capitalism, the U.S. financial system and the U.S. as a nation. It's as if a serial adulterer announced that now that his wife is having an affair then his own adultery is thus legitimized. But this justification fools no one; the adulterer has delegitimized his own fraudulent, debauched marriage and himself.
That is precisely the situation of the U.S. financial sector and Empire, which has employed legitimate military forces in illegitimate "pre-emptory" wars and other uses of force which are purposefully kept as State secrets lest the American citizenry question their legitimacy and necessity.
This process of legitimizing the illegitimate and thus delegitimizing what was once trustworthy and authentic can be seen in all the mechanisms and structures described in this analysis, financial, intellectual and political. It is a pattern that is repeated again and again in the substitution of simulacrum for authentic systems and the masking of this substitution with delusions, deceptions and misrepresentations actively promoted and disseminated by a sophisticated mass media marketing/propaganda machine.
Here are examples of "business as usual" which were not "business as usual" a relatively short time ago:
Advertising medications directly to consumers was banned until only a few years ago. Pharmaceutical firms could advertise only to doctors in professional journals. Compare the advertising pages of mass-distribution magazines such as National Geographic in 1979, 1989, 1999 and 2009--the present dominance of pharmaceutical marketing is a recent phenomenon.
Investment banks were not allowed to perform commercial banking until 1999.
Banks' profits flowed from conventional lending and constituted a relatively modest percentage of overall corporate earnings until the last decade when they became the dominant profit-center, reaping fully 40% of U.S. corporate profits.
All of these fundamental changes have been legitimized and sold as "business as usual" via propaganda and induced amnesia.
It is critical to note that the