"1. Derivatives trading wasn't new; they've been traded for a long time. And derivatives aren't inherently risky or evil. There's nothing mystical about them. 2

"1. Derivatives trading wasn't new; they've been traded for a long time. And derivatives aren't inherently risky or evil. There's nothing mystical about them. 2. $88 trillion in notional value. Derivatives deals should net to zero." As long as a reasonable amount of derivatives are created for the purposes of "legitimate hedging activities" (whatever that means) then that may indeed be the case. However, as you create more and more derivatives ... as the value and volume of the derivatives increases beyond the value and volume of the underlying securities, they begin to distort the value and prices of the underlying securities. In the real world, where they affect real people. The more you distort those underlying values and prices, the more violent the snapback is. You may indeed be able to tie up the derivatives ecosystem into a tidy little box in theory, but real people get hurt when derivatives distort underlying prices. AIG and credit default swaps is a perfect (and very recent) example.