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The Preceding Does Not Eliminate The Fact That Derivatives Themselves ...


The preceding does not eliminate the fact that derivatives themselves present as well as pose risks in their methods of solving problems, much as in the case of an operation to remove a cancer, or fix a broken bone have their own inherent risks as well. It simply is a question of the risks that existed before the installation of derivative solutions were causing and creating directions, and congestion that would not clear itself. Derivatives are at times sort of a band aid as well as diagnosis, operation, and health plan, depending upon the situation, and or application they are being put to. In many instances, using the emerging markets as an example, they aided in clearing congestion as caused by risk being unacceptable, and brought time for national economies, and banks to set into place measures and solutions that would provide long term corrections. Thus, in many cases derivatives are a stopgap measure, whereas in others they are the long-term solution.
Thus derivatives represent an instrument whereby financial creativity can be employed to either correct, forestall, and or band aid a problem, thus permitting markets to continue as opposed to halt for corrections or fixes, which they eventually do on the fly with derivatives getting them to the next gas station. The problem in financial markets is that one cannot stop the vehicle to fix tires, engines, transmissions or brakes; everything is done while markets are in motion. The Mexican, and Asian crisis' showed the massive negative effects when the vehicle stops, as everything behind it also must brake, thus resulting in a multiplier effect that fuels bailouts. Derivatives may not represent the perfect solution in all cases, or even the best solution overall, however time and time again these creative instruments have proved their worth in maintaining, fixing, permitting, and allowing business as usual to continue, and in many cases to be enhanced.
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