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It seems financialization is coming to its peak. What new tricks will capitalism come up with to continue 'growing' at an exponential rate?
by danharaj 11y ago
It seems financialization is coming to its peak. What new tricks will capitalism come up with to continue 'growing' at an exponential rate?
- pkaye 11y agoThey are not 'tricks'... they are financial 'innovations.'
- cryoshon 11y agoPretty funny how those innovations don't actually add any value. Pretty funny how we funnel our society's money directly to/through these places.
- hueving 11y ago>Pretty funny how those innovations don't actually add any value. They made buying houses a possibility without a huge mountain of cash.
- Nicholas_C 11y agoDo you own a house, car, or anything else with a note on it? Do you work for a company or government entity that has to finance projects? The value,loans, bonds, and other debt instruments add is absolutely massive.
- jazzyk 11y agoYou are talking about credit - financing infrastructure, tooling, other investments. Yes, the value is definitely there. The problem is, most of the recent "innovations" do not add any value to the economy. What value did Credit Default Swaps (CDS) ever bring to the economy? How does high-frequency trading (HFT) benefit the society?
- nemo44x 11y agoYou're right in that some instruments don't really add value. They're a bet. Credit default swaps for mortgages didn't even exist really until some smart speculators noticed that the bond market for mortgages was unstable (and full of deceit) and only needed a bit of default to create a cascading waterfall of default which nearly took down the entire financial system. Honestly, CDR's were a good idea but it made no sense for the same banks to sell them that were also baking the mortgages. It would be like selling insurance on your own car. If you crash you are out a car and have to pay someone else! It would have made sense for banks to hedge their mortgages by buying CDR's from other investors. But then, that would have affected their bottom lines and they just plain got greedy. HFT is debatable as many claim it creates liquidity. I'm not sure I buy that but I also wouldn't confuse HFT with financial instruments. For instance, packaging mortgages into rated bonds of various risk tranches in the 1970's was a brilliant innovation which enable more people to qualify for loans as their risk was distributed and sliced up among many parties. Of course, that system broke down after being abused - but the initial concept still survives and is remarkable. Other instruments like derivatives allow for affordable hedges, the ability to buy and sell at a future price you want or collect premium on that offer. They aren't just for speculators.
- tosseraccount 11y agoDoesn't all growth have an exponent?
- jdmichal 11y agoYour comment was meant to be witty, but is actually just uninformed. Exponential growth is a well-defined mathematical concept [0] and distinct from other formulas of growth. And, to specifically address your comment, the exponent in exponential growth is time, so no you cannot just dismiss it as being "some exponent". [0] https://en.wikipedia.org/wiki/Exponential_growth#Basic_formula https://en.wikipedia.org/wiki/Exponential_growth#Basic_formu...
- tosseraccount 11y agoPhysics is not financial economics.
- jdmichal 11y agoI truly do not understand your argument. First, nothing in my comment alludes to physics, except for maybe the involvement of time, which I can assure you is very much a concept in financial economics. Second, financial economics is in no way unfamiliar with exponential growth. For instance, the compounding interest formula: p-next = p-start * (1 - rate) ^ time
- tosseraccount 11y agoI'm not sure I get yours. Are you saying there is "nonexponential growth" ?
- jdmichal 11y agoOf course there is non-exponential growth. Easiest counter-example is linear growth, or perhaps in the real world a steady paycheck: p-next = p-start + growth-amount * t
- nugget 11y agoSome people don't seem to understand that there is a ceiling on macro economic debt financing as a driver of economic growth. Once someone or some company has pulled forward all their future consumption and earnings with zirp-level interest bond issuances, credit cards and mortgage notes, there's not much more they (or the economy) can do.
- dovereconomics 11y agoYou're confounding Capitalism with pure Keynesianism, which you'd probably revere.
- danharaj 11y agoNot at all. Also, Keynesian economics and Capitalism do not belong to the same category. How could I confound them? That would be very silly of me.
- dovereconomics 11y agoGenuine capitalism doesn't have a government controlling money supply, which is behind your 'exponential growth'. Instead of growing an economy, the truest capitalist is focused on freeing an economy If you wanna name the socialistic Keynesian experience 'Capitalism', that's your call. I can't do it.
- danharaj 11y agoYou don't use words the same way everyone else does. The most charitable thing I could say is that your take on Keynesian economic policy and 'genuine capitalism' is heterodox and stems from a non-mainstream ideology. There is no serious economist who would call Keynes a socialist, or socialistic, whatever that means, and the definition of capitalism does not proscribe government control of the money supply.
- chiaro 11y agoCapitalism is just a system where the owners of capital are the marginal claimants of revenues. Everything beyond that is ideology.