The paper zoo called “derivatives”

It’s possible that the history of our times will be written like this:

Capitalism emerged from feudalism after about 1500.

There were three eras of capitalism:

1) Mercantilism. Investment money made money via trade.

2) Industrialism. Investment money made money via industrial production.

3) Financialism. Investment money made money via credit and speculation.

The latter was accelerated by the creation and trading around of increasingly esoteric financial instruments. The basic ones were representative of or at least somewhat directly related to real production. Then there were “derivatives” of the more basic ones. And then there were derivatives of the derivatives. It became a crazy house of cards. To keep it from collapsing the financial authorities had to keep injecting more and more money into the system.

But there was very little real value backing many of the speculative instruments and eventually the house of cards collapsed.

https://en.wikipedia.org/wiki/Derivative_(finance)

Some of the more common derivatives include forwards, futures, options, swaps, and variations of these such as synthetic collateralized debt obligations and credit default swaps.