This editorial highlights a fascinating yet simple theory, that super-smart people (the numerati) have created extremely complex and little understood financial instruments that helped drive us to the brink of economic ruin. These instruments originally had applications of merit that were reasonable. However, the profit potential was too large and the opportunity for application in almost any area of investing was simply too great a temptation. Over the past decade, derivatives have become the instrument of choice for a variety of hedge funds, investment firms and even once staid and conservative insurance companies.
Read the rest at http://www.freakalytics.com/2009/10/16/ssnec/