BLOG OF THE DAY

In a recent blog we discussed the extraordinary risk to the marketplace that computerized trading is likely to cause at some unexpected time.

The recent trading loss that occurred at UBS is another example of activities that clearly shouldn't be allowed in the banking system.

Permitting banks to be in the trading business, usually conducted by young inexperienced personnel, is so dangerous to the monetary and fiscal well being of the banks, the government and individuals that there are few words to describe the risks involved.

In America we have depository insurance which would leave untold billions of depositors uninsured in the case of huge losses by traders.

The banking system should not be in the trading business with derivatives and options, etc. It is wrong, dangerous and must be stopped.

Unfortunately, when traders make money they get big bonuses, buy big apartments and consequently the huge risks are not faced unless there is a significant crises. One of these days, with these kinds of absurd activities continuing to be permitted, government policies will not be able to fix the problem fast enough. This will make the housing crises seem trivial.