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I'm not the OP but I have an answer. Here me out, I'll start off with some seemingly irrelevant details than bring the whole thing full circle. I start off with

I'm not the OP but I have an answer. Here me out, I'll start off with some seemingly irrelevant details than bring the whole thing full circle. I start off with a system that is even more complex than finance: Nature. Nature is complex due to natural selection. Random mutations occur and nature selects the mutations that aid with survival. If you iterate over this process over a long period of time you can have systems that are incredibly complex. Note that natural selection can function at a higher level of abstraction as well. Not just at the biological level, but at the ecosystem level as well. Ecosystems that overload or are unbalanced are killed off. It's not a coincidence that most ecosystems still around in the world today are running in a steady state of equilibrium. We can bring natural selection to an even higher level of abstraction and consider human civilization. Only the rules, cultures and behaviors that aid with the survival of the civilization live on to form even more complex systems of civilization. The global civilization that enshrouds the world today is the result of such evolution. Which brings of full circle to FINANCE. The components rules and systems of finance are not some grand design deliberately created by an architect. The concepts you see today were formed organically and under the restrictions of natural selection. Take banking. The theory is banking formed when people needed a place to store an abundant resource like grain. A business owner opened a grain shop and gave out paper certificates that represented grain storage. The certificates soon became so abundant that people basically began trading the certificates as cash, hence the formation of paper money. The storage owners realizing this now realize they can print these certificates out of thin air and loan it out to people. Hence the creation of loans and mortgages... You can see how finance forms organically and the concepts that work continue to thrive while the systems that break are eliminated by natural selection. Like biology over time this leads to more and more complex systems that somehow just work. This is the origin of complexity in finance. You will note that like biology such complexity is completely random and unnecessary like the platypus, the kiwi or the kangaroo. Finance is littered with things like the kangaroo. Don't ask a finance guy why finance is complex. This question is better served to you by an anthropologist or a historian. The finance guy is concerned with how to out compete the other finance guy, he is not concerned with the how and the why behind the entire system.

TimPC 7y ago
Loans and Mortgages predate fractional reserve banking and loans in fact predate institutional banking. They are in fact created by lending out capital to other people. In institutional banks this capital was initially depositors money. The whole concept of bank runs initially existed because if people lose faith in a bank too many of the deposits are lent out to provide the money to everyone who tries to withdraw. Fractional reserve banking comes with the printing of the certificates out of air, but generally from paper money that existed and was controlled by a government acting through an entity like a central bank.
- crimsonalucard 7y ago
  I'm just illustrating the theoretical development of banking in general to serve as an example of how finance is organically complex in the same spontaneous way biology is complex.

TimPC 7y ago

Loans and Mortgages predate fractional reserve banking and loans in fact predate institutional banking. They are in fact created by lending out capital to other people. In institutional banks this capital was initially depositors money. The whole concept of bank runs initially existed because if people lose faith in a bank too many of the deposits are lent out to provide the money to everyone who tries to withdraw. Fractional reserve banking comes with the printing of the certificates out of air, but generally from paper money that existed and was controlled by a government acting through an entity like a central bank.

crimsonalucard 7y ago
I'm just illustrating the theoretical development of banking in general to serve as an example of how finance is organically complex in the same spontaneous way biology is complex.