China Sums Up US Financial Innovation: "Smart Kids Picking People's Pockets Is Not Very Good"

Tyler Durden's picture

When fringe-blogs highlight the reality of the US banking system and its financial engineering as nothing but overly complex three-card-Monte, it can be shrugged off; but when the head of China's sovereign wealth fund (yes the same one that will bail the world out) notes that the JPMorgan loss highlights a system that has become too complex, perhaps some should listen. As Bloomberg BusinessWeek reports, Gao Xiqing of CIC stated that "I think we do need to slow down a little bit instead of rushing up to all these fancy derivatives." The fact that the 'whale' loss was not a rogue trader but a systemic decision gone wrong on weak risk management of an overly-complex position was "the single most revealing thing" to Gao as he expressed concern about a society in which "all the best engineers are engineering financial products." Summing up the entire ethos of US financial innovation he concluded: "You have all the smartest kids to design these products, the only purpose of which is to get money out of other people’s pockets, that is not very good."


Via Bloomberg BusinessWeek:

JPMorgan Chase & Co. (JPM)’s $5.8 billion trading loss this year showed that the financial system is getting too complicated for even respected institutions, the president of China’s sovereign-wealth fund said.


You are creating a system that very few people understand, much less the regulators because the regulators haven’t the incentives like the bankers,” Gao Xiqing, president of China Investment Corp., said today at a lunch hosted by the Economic Club of New York. “As a former regulator I think we do need to slow down a little bit instead of rushing up to all those fancy derivatives.”


Gao, who said he was speaking in a personal capacity and not in his role at the CIC, said the loss attributed to a trader known as the London Whale was especially instructive because it happened at a bank he holds in high regard and wasn’t the result of a rogue employee. New York-based JPMorgan, the biggest U.S. bank by assets, lost the money because of derivatives held by its chief investment office.


“That single thing was most revealing to me at least because I respect this institution JPMorgan very much,” he said. “We believe in their risk management, we believe in the fact that they’re being cautious.”


He expressed concern about a society in which “all the best engineers are engineering financial products.”


“You have all the smartest kids to design these products, the only purpose of which is to get money out of other people’s pockets,” he said. “That is not very good.”


Gao said he tries to avoid relying on financial models in his own investments because he doesn’t trust them.


CIC is an investor in Morgan Stanley (MS), the sixth-biggest U.S. bank, which competes with JPMorgan.

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mrktwtch2's picture

"there is a sucker born every minute" barnum..

GetZeeGold's picture




Getting schooled by China.......this truly is rock bottom.


No problem....we'll send our kids to China as foreign exchange students....get some Timmy.


john39's picture

The U.S. is a couple hundred years old... China is several thousand years old...  these games have come and gone many times in China, and enough of them know their history to know this time is not different, only bigger in scale.

greased up deaf guy's picture

the truth hurts... especially when it comes from the epicenter of truthiness.

malikai's picture

I was totally with him until this line:

CIC is an investor in Morgan Stanley (MS), the sixth-biggest U.S. bank, which competes with JP Morgan.

imaginalis's picture

Oh, and like the Chinese banks don't know how to steal money. Although, perhaps they don't rate as bad as some of the other thieving cooperatives like found in Burkina Faso, London and New York.

Urban Redneck's picture

Hey, leave my buddies in Burkina Faso out of your evil spawn of satan banker rant, they're HONEST THIEVES, unlike the City or NY banker varietals.

derek_vineyard's picture

collective insanity.....intelligence gone destructive, again


a breathe of fresh air would be a movement for the the young minds to try to create something constructive---lets say alternative energies.  what if................what if people actually wanted to create something useful and society backed them?

fairy tale....wake up, derek

economics9698's picture

Those fucking Chinese are like the Borg, they keep getting smarter.  

Panafrican Funktron Robot's picture

"lets say alternative energies"

The energy companies are pretty awesome at buying up alt energy patents and stuffing them on the shelves, never to be used.

TheFourthStooge-ing's picture

Urban Redneck said:

Hey, leave my buddies in Burkina Faso out of your evil spawn of satan banker rant, they're HONEST THIEVES, unlike the City or NY banker varietals.

How true, indeed. Besides, all of that bad stuff happened when they were called Upper Volta.

When you change the name, you change the game. I mean, look at GMAC. They were as rotten as they come, but now that they're called Ally, they are honest, caring, and profitable.

ParkAveFlasher's picture

This is an extremely astute analysis that critiques the society in a nutshell.  Our best minds do not design, produce, maintain, and perfect real engines, they manufacture financial calculations with the only goal of delaying the inevitable.  

NotApplicable's picture

Confucius said, “The fish rots from the head down.”

Government corrupts. Absolute government corrupts absolutely.

True.North's picture

CIC is too large to be a muppet, but I lost it around here -- “We believe in their [JPMorgan] risk management, we believe in the fact that they’re being cautious."

JPMC is Too Big To Manage, but they believe in its risk management? That doesn't even make sense, not to mention implying Morgan Stanley somehow has better risk controls is totally nuts. See: Howie Hubler's $9 billion loss.

Dexter for President's picture

He's handing JPM a shit sandwich but trying to be nice about it - of course he doesn't mean the nice statement.

TheFourthStooge-ing's picture


He's handing JPM a shit sandwich but trying to be nice about it - of course he doesn't mean the nice statement.

Exactly. What you are seeing here is similar to damning with faint praise. The public face put forward by Chinese officials is polite, refined, and diplomatic. It would be highly irregular, almost scandalous, for one to engage in direct criticism.  In comparison, the conduct of many western officials has a crudity which verges on the cartoonish.

matrix2012's picture

hi john39 - you make a sound and valid point!


Take a look at folowing research works of Charlotte Harris Rees.


The Asiatic Fathers of America  -

“In 2006 Charlotte Harris Rees published an abbreviated edition of her father’s The Asiatic Fathers of America. Through her painstaking research she went on to publish two more books of her own - 'Secret Maps of the Ancient World' and now 'Chinese Sailed to America Before Columbus: More Secrets from the Dr. Hendon M. Harris, Jr. Map Collection'.

Both of these books are the results of much more evidence that was gathered by the author in her extensive research and tireless scholarly pursuit. These books are recommended reading for all who are interested in revisiting world history in a new light.”

Dr. Hwa-Wei Lee, Former Chief, Asian Division, Library of Congress (Retired);  Dean Emeritus, Ohio University Libraries


Secret 4000 year old Maps of The Ancient World

Published on Sep 25, 2012 by DiscloseTruthTV

Researcher Charlotte Harris Rees discussed Asian maps (see below) dating as far back as 4,000 years ago that show the coastlines of the Americas. Picking up on the work of her father who collected these maps, she suggested that the ancient Chinese were seafaring and traveled to America far before Columbus' arrival. As further evidence, she cited genetic markers that are shared only by Asians and Native Americans.


Charlotte Harris Rees, author of 'Secret Maps of the Ancient World' embarked on an exciting journey of discovery after finding out that her late father, Dr. Hendon Harris Jr. (the author of The Asiatic Fathers of America), had been right: the Chinese were in America thousands of years before Columbus. Charlotte's book lays out overwhelming evidence (including DNA tests) in support of her father's conclusions.

For years after his death in 1981, Dr. Harris' map collection lay forgotten in a box under his son's bed. Hoping to verify their accuracy, Charlotte and her brother took the maps to the Library of Congress in 2003, where they have been studied for the last few years.

In this exciting segment, Charlotte tells us how DNA sampling can reveal the entire migration history of a people, recounts her experiences with the Library of Congress, and shares her thoughts on why this startling discovery has been overlooked despite having been in plain sight. This is a great time to rethink history and to step into the thrill of discovery. Join us in this modern-day adventure!


"I never said that my family's maps are 4000 years old but that they are copies of copies of copies of maps that date back 4000 years. They are related to a Chinese geographical account that old. Our particular maps are Ming dynasty. Still old, but that would date back almost 500 years."

           - Charlotte Harris Rees ~

replying at


Other links:

-Reviews of “Secret Maps of the Ancient World” | Gavin Menzies

This website serves as a focal point for ongoing research into pre-Columbian voyages to the New World. Our research team was set up to receive and disseminate all information received via this website.


-Secret 4000 year old Maps of The Ancient World — State of Globe

by Hans Christian Faerden on September 26, 2012

Secret 4000 year old Maps of The Ancient World – YouTube. –

The longer we study the REAL history of this world, not only the history of the WINNERS, the more we will understand how much NO ONE EVER TOLD US. I do not know the truth about this map, but there is a lot of info available suggesting that there must have been very special cultures here on earth back then.



Bananamerican's picture

"You have all the smartest kids to design these products, the only purpose of which is to get money out of other people’s pockets"


"well......there it is"  -Amadeus

Gully Foyle's picture


"There's a sucker born every minute" is a phrase often credited to P. T. Barnum (1810–1891), an American showman. Though this phrase is often credited to Barnum the actual authorship is unclear.


When Barnum's biographer tried to track down when Barnum had uttered this phrase, all of Barnum's friends and acquaintances told him it was out of character. Barnum's credo was more along the lines of "there's a customer born every minute" — he wanted to find ways to draw new customers in all the time because competition was fierce and people could become bored easily.[citation needed]

photo of P T Barnum by Charles Eisenmann

Some sources claim the quote is most likely from famous con-man Joseph ("Paper Collar Joe") Bessimer,[1] and other sources say it was actually uttered by David Hannum, spoken in reference to Barnum's part in the Cardiff Giant hoax. Hannum, who was exhibiting the "original" giant and had unsuccessfully sued Barnum for exhibiting a copy and claiming it was the original, was referring to the crowds continuing to pay to see Barnum's exhibit even after both it and the original had been proven to be fakes.

In turn, Barnum's fellow circus owner and arch-rival Adam Forepaugh attributed the quote to Barnum in a newspaper interview in an attempt to discredit him. However, Barnum never denied making the quote. It is said that he thanked Forepaugh for the free publicity he had given him.[citation needed]

Another source credits late 1860s Chicago "bounty broker, saloon and gambling-house keeper, eminent politician, and dispenser of cheating privileges..." Michael Cassius McDonald as the originator of the aphorism. According to the book Gem of the Prairie: Chicago Underworld (1940) by Herbert Asbury, when McDonald was equipping his gambling house known as The Store (at Clark and Monroe Streets in Chicago) his partner Harry Lawrence expressed concern over the large number of roulette wheels and faro tables being installed and their ability to get enough players to play the games. McDonald then allegedly said, "Don't worry about that, there's a sucker born every minute."[citation needed]

The phrase is the title of the opening song in the Broadway musical Barnum, about P.T. Barnum's life.

Itch's picture

The irony is that you dont even need to be a sucker to get sucked these days. The amount of smarts needed to compete head on with the dealer is probably enough to get you thrown in jail.

lolmao500's picture

In two words : HFT and corruption.

In other news, Syria artillery falls for 6th straight day in Turkey.

Romney to do speech on foreign policy at 11.20AM EST on CSPAN (the BS and warmongering will be epic on this one)

GMadScientist's picture

Curious for Syrians to be using US issue rounds instead of Ruski, but OK.

What happens in the Mormon Temple, stays in the Mormon Temple. ;)

JustObserving's picture

Quick, give that man a Nobel Peace Prize:

Mitt Romney: arm the Syrian rebels

Republican presidential candidate is to call for an escalation of the conflict in Syria in a major foreign policy address


Mitt Romney will call for an escalation of the conflict in Syria by arming rebels with the heavy weapons needed to confront president Bashar al-Assad's tanks, helicopters and fighter jets.

Romney is to make the proposal on Monday in what his campaign team has billed as a major foreign policy speech in Lexington, Virginia.


Bicycle Repairman's picture

I'm going to file this under "Mitt so dumb"

Mitt wants to give a foreign policy speech on national (cable) TV.  Polls show the American people prefer Obama's foreign policy.  So why give a speech and alienate people?  The people who own Mitt already know his foreign policy.  They gave it to him.

Totentänzerlied's picture

"Polls show the American people prefer Obama's foreign policy."

Hahahahahahahahahaha - It's win-win because, Romney or Obama, the American people get exactly what they deserve in leadership and foreign policy. A breathtaking embarassment to free humankind.

Bicycle Repairman's picture

Yeah, I'm just talking inside baseball here, not big picture stuff.

GeezerGeek's picture

I thought that we/NATO were already helping the rebels. Just like we did in Libya, and we all know how well that turned out.

matrix2012's picture

one nobelized piss prize is being ordered... whether rommey be or be not, he's gonna get such bestowment, in 2013.

LawsofPhysics's picture

LMFAO!!!  Coming from the head of a wealth fund in a state-run, centrally planned, communist country, the irony is thick (could this guy compete in a free market without his state cronies picking the winners for him?).  Wake up sheeple, Chinese wages are your future otherwise.

Bicycle Repairman's picture

"could this guy compete in a free market without his state cronies picking the winners for him?"

No he could never do that like .... who?

Zola's picture

China is taking the torch from the US, they do have a number of challenges to face, true, but you can prepare to ship the statue of liberty over there if they manage to surmount them.

Oh regional Indian's picture

The Statue of Lib. is actually a freemasonic symbol of ISIS. 

ISIS = $ (supposed to have two lines).

Trapped. It's the hotel california check in point. ;-)


pepperspray's picture

Like a Chinese MBA student stuck at RPI

Oh regional Indian's picture

Too funny pepperspray, it's where I got my US degree.

Go Reds....etc.... :-)


JustObserving's picture

If the Federal Reserve can pick your pockets with infinite QE, so will the smart kids with financial engineering.  There is no money like free money.


GFKjunior's picture

Can you really blame us? I'm in my mid twenties and went from tech companies to writing security software for banks.


Worse environment and people but the paycheck lets me buy 3oz of gold a month and plenty of ammo, might as well get it while I can. The end is near.

LawsofPhysics's picture

Classic.  Now all you need is a canoe.  be sure to file you lost or stolen report as soon as you have your accident.

Bangin7GramRocks's picture

You are in your mid twenties and have $5,000 per month after all of your bills to buy gold. I CALL BULLSHIT! Stop trying to impress people with your "stack" skippy! You will never get laid that way.

Yen Cross's picture

 I also call "Bullshit"! The only 3 TOZ he's getting is on paper, from the "ghost bank"he's writing P/M management software for!

GeezerGeek's picture

Maybe he is employed and also lives in his parents' basement and brown bags PB&J for lunch each day. Reduce expenses and stack the bulk of one's income.

Gandalf6900's picture

this from the #1 corrupt country in the WORLD, not good...

Dr. Engali's picture

As far as being the #1 corrupt country in the world, I'd say we have that title pretty well locked up.

Totentänzerlied's picture

Shame and Honor-based societies are on another level entirely. Westerners could not compete with that level of corruption, which they do not even view as corruption.

When's the last time you had to bribe someone face to face?

GeezerGeek's picture

What Americans may call corruption is, in China and many other places, simply a cost of doing business. At least that's what my (Chinese) wife says, as do her (Chinese) friends.

earleflorida's picture

'the student has now become the master'

Q___       kung fu

Dr. Engali's picture

If I didn't know any better I would swear that Mr. Gao has been reading the Hedge.

Cognitive Dissonance's picture

I suspect there is a LOT of stealth reading of the Hedge in many supposedly brain dead circles. Many so-called mainstream money managers seem to be coming to their senses. The PTB is terrified of this.

First that laugh at you, then they fight you, and then they join you. But all along this path they read/watch you.