QuestionerAnd every year, tens of trillions of dollars of derivatives are bought and sold. It just seems to be getting bigger and bigger and almost certainly improperly accounted for. You see anything imminent that could derail this ever-inflating bubble.
WarrenWell, we've tried to do a little to mitigate it ourselves by talking about it. But you're right, and it isn't the derivative itself. I mean, there's nothing evil about a derivative instrument. As I mentioned, we have 60 some of them at Berkshire, and on Monday I will go over the directors with the directors, I'll go over all 60-some, and believe me, we'll make money out of those particular instruments. But the usage of them on an expanding basis, more and more imaginative ways of using them, introduces essentially more and more leverage into the system. And it's an invisible or largely invisible sort of leverage. Now, if you go back to the 1920s, After the crash, the United States government held hearings. They decided that leverage margin in those days, as they called, leverage contributed to perhaps the crash itself and certainly to the extent of the crash. And it was like pouring gasoline on a fire was when people's holdings got tripped. You know, when stocks went down 10 percent, people had to sell. another 10% more people had to sell and so on. Leverage was regarded as dangerous, and the United States government empowered the Federal Reserve to regulate margin requirements, regulate leverage. And that was taken very seriously. And for decades, it was a source of real attention. I mean, if you went to a bank and tried to borrow money on a stock, they may just sign certain papers as to, you weren't in violation of the margin requirements. And they policed it. And it was taken quite seriously when the Fed increased or decreased margin requirements. It was a signal of how they felt about the level of speculation. Well, the introduction of derivatives and index future, all that sort of thing, has just totally made any regulation of margin requirements a joke. They still exist. You know, it's an an an an acronymism. So I believe, I think Charlie probably agrees with me, that we may not know where exactly the danger begins and where, and at what point it becomes a super danger and so on. We certainly don't know what will end it precisely. We don't know when it will end precisely. But we probably, at least I believe, that it will go on and increase to the point where at some point there'll be some very unpleasant things happen in market. because of it. As sure, as God made little green apples, this is going to cause a lot of trouble in due course. As long as it keeps expanding and ballooning and so on, and the convulsions are minor, it can just go on and on and on. But eventually, there will be a big denouement.