CFTC Commissioner Chilton Discusses the Movie Back to the Future (with Lofchie Comment)

CFTC Commissioner Bart Chilton discussed the current market for swaps and the trading of futures comparing it to the 1985 Michael J. Fox movie Back to the Future. In regard to the regulation of swaps, Commissioner Chilton asserted that it is necessary to get "the rest of those 400 [Dodd-Frank] rules in place to preserve what those future boys . . . back in 1848 had originally envisioned."

Lofchie Comment: It is always tempting to make appeals to a past golden age and to compare it with our present problems, imagining that everything would be OK if we could somehow free ourselves of modern corruption. (For a brief discussion of this line of thinking, sometimes referred to as the Golden Age Fallacy, here is a link to an article discussing the ancient view of human decline from Golden Age, to the Silver Age, to the Bronze Age, and so on.) That said, it seems a questionable proposition that we should establish as our gold standard the markets that were envisioned by Chicago commodity traders in 1848. To give some historical perspective on what commodity traders in 1848 might have imagined that markets would look like, it is useful to think about what the world looked like at that time. According to the Wikipedia chronology of invention, (i) the friction match was invented in 1826 and (ii) the telephone not until 1876. Should we really be trying to re-create the operation of markets and financial products in a world that was closer in time to the invention of the friction match than it was to that of the telephone?

See: Text of Chilton's Speech: "Future Boy".