Quote Originally Posted by tequila View Post
Where are you getting that I expect risk assessment to be flawless?
From your own words.

I do expect, however, that if the gamblers are compensated at such high levels that risk assessment would be better performed than it was in 2008.
In other words, flawless.

However, I would settle for the gamblers to lose their government backstop and be broken down to the point where their poor risk assessment did not destroy the entire financial system.
The "gamblers" include even you if you so much as deposit in a bank.

Then they can go about being imperfect and going bust or being profitable without hurting the real economy.
So no more FDIC insured deposits? Good.

Sure, that is what derivatives were meant to do, but if you believe that most derivatives trading is strictly hedging, then you must be one of those who believes that Vegas gambling exists because people really enjoy card games.
67 percent of derivative trades are interest rate contracts, so you're obviously wrong.

More to the point, they are the backstop for much of the gambling that goes on, and the ultimate lender of last resort.
Wrong. Treasury holders--specifically institutions--are the backstop for most of the "gambling"--as you inartfully put it--that goes on. Central banks are merely their principle agents.

They are the ones who will step in when the markets freeze.
As the system of monetary policy was so designed.

When they doot, as the ECB seems determined to show us, the whole game can come to an end.
I hate to call you on this, but show us what exactly?

You don't see that 2008 and 2011 are related?
A relationship is testable and evident. There's another term entirely for what you're describing.

Perhaps you are one of those who believes the 20th century was very stable - WWI and WWII were just eight years in 100, after all.
No, just one of the ones who doesn't find idle rhetoric particularly useful in understanding the financial system.