Those Deviant Derivatives

I'm in queue for Alterac Valley. The Horde have won nearly every battle so far today. I'm hoping to change that, though I doubt prime-time will be on my side. While talking to my guildies, Megan gently suggested a healthier use of my time. So while I wait for that battleground to begin, I figured I'd write a paragraph about it.

But seriously. I'm also watching Anderson Cooper talk to some CNN guest about the current state of affairs. I don't mind telling you that my eyes get blurry and my brain gets fuzzy when I think back to Accounting 319 when Professor Whats-his-name (how do students remember professors' names?) went over accounting for derivatives. That is, after all, the problem with the recent "market adjustment" -- as Bush calls it. Hearing the guys on television say they don't understand derivatives helps me not feel so stupid. In fact, I read a pretty long article at WSJ about the accounting behind these derivatives and how it came to today's crisis. I understood that article about as much as that day or two in Accounting 319, but the author made sure to mention that few people really understand derivatives and how they work -- or don't work.

Here's what I know as those rascals in Alterac Valley finish up. Some weird stuff is going on and it's not due to preferences of red states and blue states and people who were greedy to buy houses they couldn't afford, and greedy to sell houses their customers couldn't afford. It really does come down to basic accounting fundamentals. These companies were able to hire really smart guys who really understand FASB and GAAP and all that and they can manipulate fundamental ideas like what's a liability and what's an asset. The manipulation falls somewhere in that hazy word, derivative, and it's a bit scary that I'm heading into the workforce as one of the stupid guys who can write a journal entry according to the name of the game, but can't yet intentionally exploit the rules.