It's a two-word phrase. When I hear these words together, it makes me want to throw up. These words are the height of immorality. Their very existence leads to obscene behavior. They are far worse than Carlin's list of seven words that the FCC doesn't let you say on television. They are words that literally, truly, almost wrecked western civilization.
And yet people still say them as if they were good words. They are still recited in polite company. They are still not recognized for the obscene lie that they are by their very semantic existence. It is the phrase, the words themselves, that prompt the deeds, and no amount of shitpisscuntfuckcocksuckermotherfuckertit, even recited in prime time when kiddies might be watching, will ever do as much harm.
The two words are financial products.
There is no such thing as a financial product. A product is something that somebody makes and somebody sells to someone else. A car is a product. A can of soup is a product. A newspaper is a product. Once the sale of a product is made, the relationship is basically over. Sure, there could be a warranty associated with the product, but that's just a contract to help cover any defects in the product.
There are, however, financial instruments. An instrument is some kind of arrangement in which money changes hands today in expectation of something happening tomorrow. A financial instrument might be a share of stock. It might be a bond, which simply represents debt whose interest has to be paid in regular installments. It might be something more exotic, like an option, which is the right to buy stock at a given price up to a given date in the future, regardless of the actual price that day. It might be a future, which is the right to buy or sell something (oil, corn, foreign currency, the proverbial pork bellies, etc.) at a given price at some specified date. No, the pork bellies don't come to you; it's a financial instrument, a bet on price, and it is meant to hedge the price of the commodity against market price changes. It still has a time component, a relationship component, albeit just with a clearinghouse.
There's nothing inherently wrong with most of these. Options are even one of the tricks that a little guy can use to improve his stock market success. Take a stock you own and sell a call option on it (the right for the option buyer to get the stock at a fixed price) at something above the current price. You get an option price, and if the stock doesn't hit the strike price by the time the option expires, you keep the stock. Worst case, you get the strike price, which might be below the stock's actual price but you're still selling at an agreeable price.
But that's not what gets obscene. The idea of financial products is that our economy doesn't need to produce real things any more, because we Americans have moved beyond the manufacturing stage. We are more creative with money than with real stuff. I heard a bozo being interviewed on the radio this morning about how the Massachusetts economy is more resilient than the country on average because we no longer make a lot of things, we make financial products. Gag me, Witherspoon!
Financial products was the meme that created collateralized debt obligations (CDOs). It was the idea behind credit default swaps. It was the idea behind synthetic CDOs, which were CDOs that merely represented interests in other CDOs, rather than plain old CDOs, which represented interests in mortgage backed securities, which themselves were a financial product representing bundles of mortgages whose actual quality was unknown and whose legal status is still in limbo.
What makes the product idea so bad is that products are promoted by salesmen, whose incentive is to sell, rather than by people who actually understand or care about the nature of the underlying deal. An honest banker looks at a loan application and applies some kind of standards to it, making the deal if it looks good enough. The real banker (not to be confused with a bankster -- the honest kind does exist, especially at smaller banks and credit unions) is creating a longer-term relationship. A financial product seller, in contrast, is just there to make a deal and get his bonus for making "sales"; he hopes that it's somebody else who gets screwed.
It is economic santorum.
The economy won't really recover until we get back to fundamentals. We need to make real stuff. It can be software or movies or other soft products, not just iron and steel stuff, but still something of value. Financial instruments are necessary to finance a real economy in which real stuff is made. But they should never be treated as products. They are not the economy themselves, no matter how hard a bankster or apologist for them will try to say that they are.