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Devaluing Goldman Sachs to 0

sustainability depends on a principle of society being able to devalue organisations to zero which compound undue harm- ie if your organisational system loses all trust of society, you have no social value, and so no business reputation , it is healthy societies that generate strong economies not vice versa; if we cant apply this principle to the world's 5000 largest systems the human race will run out ouf tomorrows

 

nature's evolutionary rules destroy dinosuars that are too big to co-exist with others- humans have no special rights to break nature's laws that I know of; aftre mentoring Gandhi, Einstein clearly foresaw the compound risk that the first generation to be globally connected by tech would face -the maths of sustainability in our network age spins exponentially up or down round value multiplication - the operand that models connectivity (the core dynamic of the 21st C) not separation; maths integrates from the bottom up, there is no whole truth or future joy in being globally big broethered top down

 

if even bush's administration could zeroise andersen its vital that obama regains the trust of the people -show us we havent returned wall street to the same mentality that will speculate all over again; every young american should have enough information to vote whether to get rid of goldman sachs because the last 15 years of globalsiation has seen old america turn against its young in a most unnatural way ; leaving such huge debt instead of investment in the next generation that -compared with its worth today what value will the dollar have in 2020 -  60%,  40% 20% unless we turn round the wall street syndrome?

 

throughout the last 300 years there is a clear economic narrative which the word entrepreneur was actually coined in 1800 France to guard; once in a generation fans of microeconomics anmd community integrity need to collaborate and get rid oif macroeconomic rule- societies that failed to achieve micro renewal risk descent into regional dark ages or being the root the cause of wars; the only difference today is that unless enough netizens unite around micro during 2010s then sustainability will be lost in communities all over the world; http://www.worldcitizen.tv/ the good news is that next month noble laureate muhammad yunus book on this once in humanity choice we of the 2010s have the exciting privilege to act on

 

tell me  info@worldcitizen,tv if you want either your vote on percentage wirth of dollar or your vote to zeoise goldman sachs regsitered ; tell me if you have a link to the havoc that goldman sachs caused - eg did it not cause AIG to sell the most junky insurance product ever fiddled with; meanwhile george soros may be more politely worded but his guidance seems clear

 

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GeorgeSoros.com Newsletter

Dear Friends and Colleagues:

 

In Friday's Financial Times George reflects on the current case against Goldman Sachs and the implications more broadly for regulation and reform of the trade of derivatives. I include his essay below.

 

All best,

 

Michael Vachon

 

George Soros

Financial Times, April 23, 2010

 

The US Security and Exchange Commission's civil suit against Goldman Sachs will be vigorously contested by the defendant. It is interesting to speculate which side will win; but we will not know the result for months. Irrespective of the eventual outcome, however, the case has far-reaching implications for the financial reform legislation Congress is considering.


Whether or not Goldman is guilty, the transaction in question clearly had no social benefit. It involved a complex synthetic security derived from existing mortgage-backed securities by cloning them into imaginary units that mimicked the originals. This synthetic collateralised debt obligation did not finance the ownership of any additional homes or allocate capital more efficiently; it merely swelled the volume of mortgage-backed securities that lost value when the housing bubble burst. The primary purpose of the transaction was to generate fees and commissions.


This is a clear demonstration of how derivatives and synthetic securities have been used to create imaginary value out of thin air. More triple A CDOs were created than there were underlying triple A assets. This was done on a large scale in spite of the fact that all of the parties involved were sophisticated investors. The process went on for years and culminated in a crash that caused wealth destruction amounting to trillions of dollars. It cannot be allowed to continue. The use of derivatives and other synthetic instruments must be regulated even if all the parties are sophisticated investors. Ordinary securities must be registered with the Securities and Exchange Commission before they can be traded. Synthetic securities ought to be similarly registered, although the task could be assigned to a different authority, such as the Commodity Futures Trading Commission.


Derivatives can serve many useful purposes, but they also contain hidden dangers. For instance, they can pile up hidden imbalances in supply or demand which may suddenly be revealed when a threshold is breached. This is true of so-called knockout options, used in currency hedging. It was also true of the portfolio insurance programs that caused the New York Stock Exchange's Black Monday in October 1987. The subsequent introduction of circuit breakers tacitly acknowledged that derivatives can cause discontinuities, but the proper conclusions were not drawn.


Credit default swaps are particularly suspect. They are supposed to provide insurance against default to bondholders. But because they are freely tradable, they can be used to mount bear raids; in addition to insurance they also provide a license to kill. Their use ought to be confined to those who have a insurable interest in the bonds of a country or company.


It will be the task of regulators to understand derivatives and synthetic securities and refuse to allow their creation if they cannot fully evaluate their systemic risks. That task cannot be left to investors, contrary to the diktats of the market fundamentalist dogma that prevailed until recently.


Derivatives traded on exchanges should be registered as a class. Tailor-made derivatives would have to be registered individually, with regulators obliged to understand the risks involved. Registration is laborious and time-consuming, and would discourage the use of over-the-counter derivatives. Tailor-made products could be put together from exchange-traded instruments. This would prevent a recurrence of the abuses which contributed to the 2008 crash.


Requiring derivatives and synthetic securities to be registered would be simple and effective; yet the legislation currently under consideration contains no such requirement. The Senate Agriculture Committee proposes blocking deposit-taking banks from making markets in swaps. This is an excellent proposal which would go a long way in reducing the interconnectedness of markets and preventing contagion, but it would not regulate derivatives.


The five big banks which serve as marketmakers and account for over 95 per cent of the US's outstanding over-the-counter transactions are likely to oppose it because it would hit their profits. It is more puzzling that some multinational corporations are also opposed. The only explanation is that tailor-made derivatives can facilitate tax avoidance and manipulation of earnings. These considerations ought not to influence the legislation.

The writer is chairman of Soros Fund Management

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