Derivatives Necessarily Potential Economic Disasters?

Remember the hullabaloo about securities derivatives, such as interest rate swaps and credit default swaps? And their connection with subprime mortgages and collalteralized debt obligations? With their role in the financial meltdown?

The left rails against derivatives, that CDS (credit default swaps) caused the financial meltdown in the mortgage market.. But there was a much larger market in interest rate swaps, and there was no problem with fixed income assets.

And there was an even larger market In foreign exchange swaps, than in CDS. Moreover, there was no problem in the currency markets.

So derivatives were not the main cause of the financial meltdown. AIG lost $39B on derivatives but also $24B on mortgages with no derivatives. The counter parties on derivatives were paid off 100 cents on the dollar.

After all, government excesses, such as housing and poor monetary policy, produced economic problems, not bankers who become bystanders by necessity and happenstance. (See the Earl J. Weinreb NewsHole® comments.)