Everyone knows by now that derivatives are a major cause of the world’s present economic crisis. Some long used and very valuable derivatives known as options have always proven their worth as insurance vehicles in various markets. But a new crop of derivatives that started to appear in the 1990s, known in the trade as “exotics,” were untested, highly theoretical mathematical constructs like credit default swaps. Billed as free market alternatives to government regulation, these exotics now not only burden our own government with huge losses, they continue to have the potential to bring down the entire international banking system.
With this experience so fresh in everyone’s mind, with the certain knowledge that free market instruments such as derivatives with no long-term proven value may carry within themselves far greater risk than any benefit they could possibly generate, you would think the future of the natural world as we know it would not be in the process of becoming yet another derivative betting parlor. Another cash cow for exactly the same Wall Street firms that gave us credit default swaps.
You might well think that. And you would be dead wrong.
Carbon dioxide emissions trading is the new “solution to pollution” now being peddled by Wall Street with the connivance of governments around the world. We have decades of proven experience with government regulation that sets fixed standards on various kinds of emissions. We know this approach works because it has worked over and over again in every place where regulation has been appropriate and properly enforced. But…
The Wall Street slickers who stand to make mega-bucks from a carbon emission trading scheme that some estimate will have a trillion dollar market value by 2020, and the world’s biggest polluters who are their partners in pushing this venture, know how to convince the rubes in Washington and Europe that emission trading is the better, the more cost-effective way to address the carbon dioxide global warming threat. Their approach is to use a few cleverly culled case studies, a bag of excuses when carbon emission trading is actually tried and flops, and the ultimate argument that reduces the sanest public official to drooling compliance in these tough economic times—honest regulation would cost jobs and profits. You could float a fleet of giant oil rigs in this ocean of snake oil.
Ultimately, the issue here comes down to ownership. If we allow Wall Street slickers to destroy our economy in way that pads their own pockets, well, that’s not a nice outcome for most of us, but the economy is a human invention after all so we have a perfect right to let it be destroyed if we are stupid enough to let that happen. But we don’t own the natural world. It’s not ours to destroy. We can’t allow ourselves to be fooled in this realm by self-serving and in many cases self-deluded free market solution to pollution snake oil peddlers.
Carbon dioxide emissions trading permits could well be the derivative at the end of the world—at least the world as we know it. Everyone will understand that in two or three decades. It would be far, far better if everyone understood it long before that time.