Marc Faber : “I am convinced the whole derivatives market will cease to exit. Will become zero. And when it happens I don’t know: you can postpone the problems with monetary measures for a long time but you can’t solve them… Greece should have defaulted – it would have sent a message that not all derivatives are equal because it depends on the counter-party.” - in Reuters interview
Any thoughts?
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Financial derivatives have been around for thousands of years and will likely be around for as long as human society exists as we know it.
He's right that in a volatile world, not all counterparties are created equal.
The whole derivatives market will cease to exist? Okay maybe in a "traded" market, but there is a very high need for it, and I still think it would happen "OTC"
I agree with the counterparty statement, and completely agree that they need to be reigned in and have sufficient (real) collateral backing them. However, the estimated value of the entire derivative market is around $1 quadrillion. That's a 1 with 16 motherfucking zeroes after it. That's not a joke either, sadly.
Saying that is the estimated value is a worthless statement. Much of that is in various sqpas, options, etc. that cancel each other out or are very small plays in spite of a large notional underlying.
Why would derivatives cease to exist. It's just a means of betting things will go a certain way. There will always be people on either side willing to put down money on their position. In the case of Greece clearly the guys betting against Greece were correct. But what does Greece have to do with the rest of the derivatives?
Well if its ceases to exit that's a good thing. Means it's staying for a long time
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