But in the case of derivatives money is diverted from the real economy. Instead of investing to create goods that people want, the money goes to artificial investment devices. These devices are built upon each other. Never the less, derivatives are backed by the real economy but do not add to it. Leveraging amplifies this negative effect. Therefore in order to compensate for profits, losses and commissions, people in the real economy must lose. This is the underlying cause for job losses, foreclosures and homelessness.

Since there is no incentive to stay away from derivatives and their damaging effects, they need to be regulated. Not all derivatives harm the economy, but clearly a derivatives market, the notional value of which vastly exceeds the real economy, is extremely dangerous.

The finance industry because of the financial incentives it offers has become bloated and has created a severe economic imbalance in the world. Smart people are rewarded for the creation of these toxic devices instead of working on the real problems in the world. Again, a destructive diversion.

If we were to take the old Adam Smith Wealth of Nations model where you have an interdependence between the farmer who grows wheat, the miller who grinds it into flour and the baker who transforms it into bread, you would have to add a banker, several commodities speculators and brokers all of whom for some reason have to be paid more each than the farmer, the miller and the baker combined.