Wait, the Derivatives market is worth $1,200 TRILLION dollars???

[DetlefK]

11. What's the difference between this and counterfeiting money? Please explain!

Money is a nothing more than an I.O.U.
"If you wanted to, you could exchange this piece of paper and this piece of metal for a specified amount of goods." That's the promise and it is kept by the national banks. That's why inflation and deflation are bad: The amount of money has to be equal to the amount of goods, otherwise trade collapses (consumer-wise or market-wise).

Counterfeiting money is similar to inflation: The additional money is not backed up by real-life goods or by some financial entity big enough to keep the promise in all situations.

And derivatives are similar to counterfeiting money: A bank creates a piece of currency and assigns a greater value to it than it is actually worth.




BTW: My cousin just finished his business-degree and he told me exactly that. And he's a mere student.
EVERYBODY IN THE BANKING SECTOR KNOWS THAT THE DERIVATIVES MARKET IS JUST MADE-UP VALUE! EVERYBODY!
And everybody trots along quietly, ignoring it and hoping that nothing bad will happen.