Just Read Merton Miller

Just read Merton Miller's "On Derivatives". Although published in 1997 it is a quaking experience to see its relevance to the current spasms in the financial system. Comments on CDS and CMOs are even supplied when they were in their infancy of creation. The Fed by making the support of market prices a priority over its legislated responsibility to support stable currency and monetary policy has indeed morphed into a Japanese Ministry of Finance (MOF) like entity. I guess it is only a matter of time before our banks are allowed to own major percentages of the corporations they lend to and vice versa to facilitate an self reinforcing circle of cap growth independent of market capacity for that cap growth. It is ironic that the post 87 crash, senate/congress/regulator compromise that ended the Commodity and Future Trade Commission's (CFTC) exclusive regulatory jurisdiction over futures by allowing banks and broker/dealers to trade CDS has led us to where we are. The diligent oversight by the CFTC, who preferred exchange trades over CDS trades has been replaced by the far from diligent oversight of the Fed and the SEC as regulators over the banks and broker who have allowed both parties to SIV our economy onto the rocks. Finding the right parties to paint the bull’s eye is on not that hard; unfortunately, Paulson's solution is to give the sad sacks even more centralized control. Hopefully the CTC overseers, the Congress/Senate Agriculture Committees, with enhanced clout form the AG sector boom can put the kibosh on this quackery and even rescind the 87 compromise. Market rules rock!!!!