“The Federal Reserve Bank of New York is eager to enter into close relationship with the Bank for International Settlements….The conclusion is impossible to escape that the State and Treasury Departments are willing to pool the banking system of Europe and America, setting up a world financial power independent of and above the Government of the United States… The United States under present conditions will be transformed from the most active of manufacturing nations into a consuming and importing nation with a balance of trade against it.”
- Congressman McFadden, quoted in the New York Times (June 1930)

What they do when they make loans is to accept promissory notes in exchange for credits to the borrowers’..transaction accounts.”
- 1960s Chicago Federal Reserve Bank booklet entitled..“Modern Money Mechanics”

“The real truth of the matter is that a financial element in the large centers has owned the government since the days of Andrew Jackson.”
- Franklin D Roosevel
http://www.google.com/url?sa=t&source=web&ct=res&cd=1&url=http%3A%2F%2Fwww.amazon.com%2FWeb-Debt-Shocking-Sleight-Trapped%2Fdp%2F0979560802&ei=g040Sq29IoWIsgOM0tmwDg&usg=AFQjCNEYyz-7azkefhZE8ns65kY2hFphdQ&sig2=_stsiW3Hig5kHIDVF2dSyg

I think an answer lies within the question you pose, Maximillion.

>>Should we reform the financial system? Lets face it, very few people understand the complexities and language of it all, the laws and practices.<<

Understanding the mechanics of finance is not difficult. Really it isn't. If you understand how you manage your income, banking, credit cards, mortgage etc. you can gain a fairly complete comprehension of how the whole financial system hangs together.

You can very quickly, just by reading magazine articles, gain an understanding of the logic behind arbitrage, derivatives of various kinds, hedging, even CDSs.

You obviously won't understand how to calculate their value - that's where the esoteric maths comes in - but you will gain an insight into how their mismanagement, not their existence, caused the problems we face today.

The other surprise will be when you discover that the vast majority of these instruments were designed to decrease marketplace risk. The fact that they didn't work as advertised was, again, a management problem.

Think of it this way.

You have a machine that is a bundle of electronics. You then design some fault-detection circuitry that is activated when the machine is not performing properly, and gives you instructions on how to readjust.

Everything works just fine, until it is the fault-detection circuitry that is itself broken...

Not only is the fault invisible to you, but the machine can keep getting further and further out of whack without you realising it. Until the whole thing blows.

Just skim a few articles on the internet, and you will immediately see how the debt/recession/bailout issues are interconnected, and how there simply isn't a guaranteed, textbook solution available.

There certainly isn't a simple one.

It may in the end, after all the excitement of recession is over, we will have learned not to put our faith in complex risk-management "circuitry". Or we may learn how to better manage it.

But it is still far, far too early to assume that to avoid future problems, we have to dismantle and rebuild the entire financial system.

ah ... the male hegemony!
men crash the global economy
and then sit around endlessly twiddling their thumbs
wondering what on earth went wrong
when what is wrong is their own hegemony.
the circuit-breaker is a women's legislature.

The recurring theme in this and other threads is that money comes into
being by the generation of credit/debt in the government/banking system.
Fair enough, but if interest could not be paid then the system would
fall apart. Now, my understanding is that it is growth that enables
the payment of interest out of the growth in the business.

However growth is not dependent on money but energy.
In a time of depletion of energy there will have to be a failure to
pay interest.
This is what happened last year.
In fact, it was also capital that could not be repaid.

In these new circumstances we will have to invent a quite different
financial model.

Bazz
when we speak for economic growth we mean for the growth of the BABLES, which are created from the banks and other businesses around them, this kind of growth is very fast and take people's hope on the sky, at once!
But these bables blow out soon or later (bam!) and bring an other crisis!
The croocks win money not only when we win HOPES BUT even they win more money when we lose our last CENTS!
They are not real smart but divide us and we fight each other instead to fight against the croocks!
Antonios Symeonakis
Adelaide

Perecles,
Any system that is based on perspectives (whims, rumour etc.) is unpredictable in the sense that it is reliable.
In truth capitalism has many facets that influence prices of these instruments.
They are all open to abuse/ manipulation etc take for example the currency dealing that is strategically set to influence the market which is not reflected in the fundementals.

in short they are less predictable than the climate. No one can pump the climate it just is.

All these principals are based on a even playing field but each perversion has different effects under different circumstances leading to immeasurable options both in variety and scope.

I favour the fundamentals being set i.e. a clear way of determining the risk /health of a company/corporation. The problem is Audit figures vary from the accounting style used, exclusions etc.

I favour a proportion of super being mandated in government bonds and set so they are not subject to the bull of managed funds. i.e. which average citizen can get up to date reliable figures for all the group investments?

There is risk and then their is RISK. When the most 'reliable'/'less risky' funds made losses what can an average mug punter do? in the case of the CFD disasters.
My mum (84) who took the the least risky option available just enough to cover deeming but the organization took an over all loss and she finished up losing.