5 ms·

There is a morbid satisfaction watching the formal financial system tie itself in knots as it tries to come to terms with an even worse version of itself. That

There is a morbid satisfaction watching the formal financial system tie itself in knots as it tries to come to terms with an even worse version of itself. That large part of the financial system is glorified and useless gambling designed to extract rents by intermediaries is a matter of record [0]. Regulators have no problem with that, provided their rather arbitrary and self-servingly generous red lines are respected. So what is happening now is that new information technology (faulty and immature at best) is being used by cunning operators to tap into that ingrained behavioral pattern outside their purview. Yet what spoils the fun is the sense that (somewhere in a parallel universe) all the new digital gadgetry could somehow be used to make our economies more robust, more functional, more equitable, more sustainable,... more real and less financialised. [0] https://en.wikipedia.org/wiki/Financialization https://en.wikipedia.org/wiki/Financialization

bvaldivielso 5y ago
> That large part of the financial system is glorified and useless gambling designed to extract rents by intermediaries is a matter of record [0]. Financialization is not necessarily about useless finance taking bigger and bigger roles in the economy. Finance can be useful, and can get very complex, and so it could make sense that it became a big part of the economy. Now, I cannot say for sure that the finance industry is useful enough for it to be that big a part of the economy as it is, but I'm open to the idea (also open to the opposite idea). My point is that what you portray as a "matter of record" is a biased interpretation of what financialization is, not consensus (though may still be true).
- streamofdigits 5y ago
  The wiki entry covers some disparate topics but serves as a broad brush pointer to the massively growing gdp share of the financial industry. It is a proxy for the number of redundant financial transactions (where bits are simply shifted around in zero sum re-allocation games for which intermediaries get a cut) to actual economic transactions where something "real" happens. There is obviously a bit of subjectivity in defining "real" and "useful". There is also an intermediate gray area of so-called risk management (derivatives, securitisation etc) which can easily mutate from useful to disastrous depending on the quality of regulation. But when I look at the crypto universe (from the ICO era till today) I have no doubt what it resembles...
  - lordfoo 5y ago
    > zero sum re-allocation games for which intermediaries get a cut If intermediaries get a cut, wouldn't that make the games negative-sum?
    - MispelledToyota 5y ago
      presumably if a transaction is taking place, the parties involved value the state of affairs after the transaction more than they did what came before, so value is being created, even including the transaction cost.
  - MispelledToyota 5y ago
    Presumably capital changing ownership will tend towards ownership by those who can deploy it more productively, so it doesn't seem like bits shifting around is positive evidence that it's value neutral or negative in real terms. Obviously there are lots of ways this pretty story breaks down, but I think the "just moving bits" reason isn't that strong a criticism.

bvaldivielso 5y ago

> That large part of the financial system is glorified and useless gambling designed to extract rents by intermediaries is a matter of record [0]. Financialization is not necessarily about useless finance taking bigger and bigger roles in the economy. Finance can be useful, and can get very complex, and so it could make sense that it became a big part of the economy. Now, I cannot say for sure that the finance industry is useful enough for it to be that big a part of the economy as it is, but I'm open to the idea (also open to the opposite idea). My point is that what you portray as a "matter of record" is a biased interpretation of what financialization is, not consensus (though may still be true).

streamofdigits 5y ago
The wiki entry covers some disparate topics but serves as a broad brush pointer to the massively growing gdp share of the financial industry. It is a proxy for the number of redundant financial transactions (where bits are simply shifted around in zero sum re-allocation games for which intermediaries get a cut) to actual economic transactions where something "real" happens. There is obviously a bit of subjectivity in defining "real" and "useful". There is also an intermediate gray area of so-called risk management (derivatives, securitisation etc) which can easily mutate from useful to disastrous depending on the quality of regulation. But when I look at the crypto universe (from the ICO era till today) I have no doubt what it resembles...
- lordfoo 5y ago
  > zero sum re-allocation games for which intermediaries get a cut If intermediaries get a cut, wouldn't that make the games negative-sum?
  - MispelledToyota 5y ago
    presumably if a transaction is taking place, the parties involved value the state of affairs after the transaction more than they did what came before, so value is being created, even including the transaction cost.
- MispelledToyota 5y ago
  Presumably capital changing ownership will tend towards ownership by those who can deploy it more productively, so it doesn't seem like bits shifting around is positive evidence that it's value neutral or negative in real terms. Obviously there are lots of ways this pretty story breaks down, but I think the "just moving bits" reason isn't that strong a criticism.