Side bets

Quoted from here:
http://changingminds.org/explanations/theories/side_bet.htm

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We make choices based on assumptions about the world around us and previous decisions we have made. In this we make 'side bets' that are based on a main bet or activity succeeding. If we fail at the main bet then we also lose the side bet. The side bets thus increase commitment to the main bet.

As Becker said:

"Commitments come into being when a person, by making a side-bet, links extraneous interests with a consistent line of activity."

In the same vein a reverse effect occurs in hedging activity. If we make a side bet on which we win if the main bet fails, then our commitment to the main bet fails.
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Hedge Fund side bets so far exceed the underlaying value of what they are betting on that the commitment to the main bet fails.

If the side bets win there is not enough money (in the world) to pay the side betters. More money has to be created to pay them. Another way to solve the problem is to declare all side bets null and void or proportionally relate the value of the side bets to the underlaying value.

If the holders of the side bets also have some power over the creation of money then what is the obvious thing for the betters to do?

What will creation of enough money to pay off the side bets in full do to the economy?

This seems like a good idea quoted from here:

http://www.star-telegram.com/104/story/1175840.html
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So: Immediately declare null and void all derivative contracts worldwide where the investor doesn’t have a vested interest in the property that the derivative was purchased for. After all, you can’t buy life insurance on someone you are not financially bound to, so why should someone be able to buy a derivative (insurance) on a mortgage or bond package they don’t own? That’s nothing more than a side bet on someone else’s action, and it leads some individuals to bet on disaster because it makes them rich while everyone else suffers. But our government is covering those side bets now – and it needs to end.
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Then let mortgage failure run its course with some degree of government mortgage assistance to keep those with marginal ability to pay afloat and lessen the impact. Mortgage assistance therefore has to be extended by category to those that it would help the most to survive. Then let those that can't sink. A tough way to solve this problem. Fair only in the macro analysis.