Vatican says Derivatives and Credit Default swaps unethical

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Yes, derivatives are unstable, and in other news, water is wet. Vatican is treading on rather safe ground with this one.
 
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Unstable? Yes
Unethical? Maybe

These products create liquidity in markets that can otherwise get gridlocked…
 
There are all kinds of financial derivatives. What kind does this document have in mind? Mortgage backed securities? Mortgages are a financial instrument that by its nature can be bought, sold, and transerred. In times past, S&L’s might sell mortgages to individuals. Grandma would keep the document in a desk drawer and collect the mortgage payments. But an individual mortgage is also by nature a risky instrument to hold. It depends entirely on the financial stability and credit worthiness of one individual debtor.

But if a large number of individual mortgages are pooled and the income stream is distributed through a derivative security, the risk is much less and the liquidity is much greater.
 
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