Merton Miller on Derivatives

"The seeming burst of innovation in the 1970s was merely a delayed return to the long-growth path of financial improvement."

"Regulations of derivatives is not a free good, particularly when you factor in the indirect costs imposed on end users forced to find less efficient risk-management substitutes for any derivatives made too expensive by regulation."

"Systemic risk in interbank markets can be reduced by forward integration of the futures industry's clearinghouses into the spot market for currencies and hence into the foreign exchange swap markets."

"Despite all the hullabaloo in the press, and all the bad publicity surrounding derivatives, banks are safer today, not riskier."

"Financial futures markets not only provide price risk insurance but they do so in a way that is cheaper, that is more liquid, and that is more reliable for the customers than the next best alternative."

"The stock market is really derivative of the index futures and options exchanges."

"Futures exchanges may have been a technological breakthrough of the nineteenth century, but swaps are the breakthrough of the twentieth century."

"Leveraging or deleveraging the firm's capital structure serves merely to partition that risk among the firm's securities holders."

"What you should really be worrying about is not what will happen to interest rates, but how big a bite the government will be taking out of your income."

"The Fisher solution should put a merciful end, finally, to all further concerns over whether the M&M Propositions really do apply to banking."