Paul Farrell on Market Watch has a piece titled "Derivatives the new 'ticking bomb.'" The only thing "new" about derivatives is that learning about these things is new to the masses.
If you read the piece the events that lead to Buffett statement "financial weapon of mass destruction" was his experience in unwinding Gen Re's derivative group back in 2002. It appears to have been costly and difficult.
So, clearly when someone of Buffett's reputation is warning about these things six years ago, they are hardly new.
I'd had never heard of them until about a year and half ago. At the time I immediately tried to learn more about them because I'd heard their was around $300 trillion of them. It seemed like a big number. I didn't have a clue as to how big the US economy was, but that seemed like a good comparison figure. The US economy was around $12 trillion, so these derivative things were about 25 times bigger than the world's largest economy.
Here's the thing, a year and half ago you could spend a few days around search engines looking for more information on these derivative things, yet there was practically no information out there. As far as I can tell, the "derivative time bomb" isn't a time bomb, but it has been a black hole sucking everything in its path and it's about to go super nova.
And, that is amazing, that you could something out there that is so massive, and utter silence about it withing the markets. Why was that? I stopped what I was doing when I heard about these things and I all heard was a figure in the few hundred trillion range. That was all I needed to hear to figure this is a pretty important thing to be informed about. Seriously, why haven't these things been making the news regularly, with dire warnings, oh, since about 2002?
The Market Watch piece is good, it is simply 6 years late...