In Germany we increased the requirements for trading. You have to read stuff
and sign off otherwise the bank will not allow you to buy certain products.
We have that in the US too. While ordinary "retail" investors can buy stocks and
bonds (which they can do in Germany too, I presume), most of the "exotic"
products that people complain about are restricted to "accredited" investors. In
order to be an accredited investor in the US, you have to be one of the
following:
- a bank, insurance company, registered investment company, business
development company, or small business investment company
- an employee benefit plan, within the meaning of the Employee Retirement
Income Security Act, if a bank, insurance company or registered investment
adviser makes the investment decisions, or if the plan has total assets in
excess of 5,000,000 dollars
- a charitable organization, corporation, or partnership with assets
exceeding 5,000,000 dollars
- a director, general officer, or partner of the company selling the
securities
- a business in which all the equity owners are accredited investors
- a natural person who has individual net worth or joint net worth with the
person's spouse that exceeds 1,000,000 dollars at the time of purchase or
has assets under management of 1,000,000 dollars or above, excluding the
value of the individual's primary residence
- a natural person with income exceeding 200,000 dollars per year in each of
the two most recent years or joint income with a spouse exceeding 300,000
dollars per year in those years and a reasonable expectation of the same
income level for the current year
- a trust with assets in excess of 5,000,000 dollars not formed to acquire
the securities offered whose purchases a sophisticated person makes
So as you can see, there are already quite stringent requirements for trading
most "exotic" derivatives in the US. You either have to be a millionaire, have
the backing of an institution, have government certification or all of the above
in order to trade things like mortgage-backed securities and government bonds.
I have zero ethical qualms about winning when I know that the other people I'm
competing against are millionaires, have institutional backing, have government
approval or all of the above.
Cool, so my measly pension is invested in a pension fund (as it has to be, legally). The pension fund managers then buy some exotics, which gives me exposure to the same exotics. then something bad happens, such as 2008, and I lose my future.
Thanks guys, the stringent requirements really worked in my favour there!
I think the point was that having smart people participate is wasting their time when they could be doing something more productive, not who is losing. Like for instance work on robotic arms so we can all have a household robot to do the house chores.
Medical research on non-life-threatening things is still creating value for people with less-than-fatal problems.
Physicists working on physics research might be a problem if those physicists could just divert money elsewhere in the economy into their own research programs. As it is, there's a complex system of controls so that public research money is generally used for some reasonably good purpose.
I have zero ethical qualms about winning when I know that the other people I'm competing against are millionaires, have institutional backing, have government approval or all of the above.