General Discussion
In reply to the discussion: You know the 1% are ripping us off to an astonishing extent, right? [View all]Taitertots
(7,745 posts)DU is a Company.
Everyone on DU starts buying DU bonds.
You are afraid that DU's bond prices might tank, so you buy a derivative contract to hedge your loses.
The derivative decreased your risk, so you mortgage your house and take out huge variable rate loans to buy more DU securities.
You buy more derivatives, so you can repay those loans if DU defaults or your interest rate spikes higher.
The people who lent you money take out derivatives to cover themselves if you default.
The company that sold you the derivative doesn't have to count it as a potential liability!
DU bond prices tank.
You lose all your money, your house, and you can't repay your loans.
Everyone on DU loses all their money and can't repay their loans.
All the people who loaned us money lose everything they invested.
Everyone goes to the investment banks for our derivatives, but they took all the money that we paid them, called it profit and took it.