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What does the world gain from finance? I am a bit confused. Seems to me that the only important things are assets, labor, and sometimes a medium of exchange. J

What does the world gain from finance? I am a bit confused. Seems to me that the only important things are assets, labor, and sometimes a medium of exchange. Just because I have a mortgage and a credit card doesn't mean I can't survive without them. Now that we have computers, most of us are actually and literally creating something out of nothing.

pgwhalen 5y ago
Finance allocates capital and moves risk from parties who don't want it towards parties who do want it. > Just because I have a mortgage and a credit card doesn't mean I can't survive without them. You could definitely survey without them, the same way you could survive without a car or a smartphone. A mortgage in particular is undeniably useful for many people.
- sushsjsuauahab 5y ago
  Only because housing prices have been artificially inflated? I can prove how they are, but curious to know if you agree they are. Finance is a bandaid for deeper issues.
  - icebraining 5y ago
    Only because they have been artificially inflated? That seems unlikely; the materials and labor costs alone would take multiple years to pay off by an average family. Being able to move in immediately seems useful, even if currently we're paying way too much for it.
  - smabie 5y ago
    I mean finance has existed for thousands of years. What are these deeper issues? Whatever they are it seems unlikely they are ever going away.
FabHK 5y ago
> What does the world gain from finance? Not sure whether you're asking seriously, but while there is a lot of scamming and rent seeking in finance (which is why it is subject to heavy regulation), it does provide many functions: 1. transfer of purchasing power through time (by saving/credit) 2. proper valuation 3. facilitation of investments (for companies, infrastructure, etc.) 4. investment allocation 5. risk transfer and management etc. All valuable functions. > most of us are actually and literally creating something out of nothing Your labour and your computer and the electricity used to run that computer etc. are not nothing. The economy has always been about creating something more valuable out of inputs that are less valuable. Nothing new here.
- neilwilson 5y ago
  "transfer of purchasing power through time (by saving/credit)" Except that isn't true because banks create money when they advance credit and always have done. There is no transfer. There is a liquidity provision that aims to offset the drain of liquidity to financial savings. The two don't necessarily match, and mostly they don't, with a system tendency towards net financial saving. Purchasing power is improved by banks because they take things that are not liquid and provide a more liquid instrument in exchange. In that sense they are not that much different from market makers.

pgwhalen 5y ago

Finance allocates capital and moves risk from parties who don't want it towards parties who do want it. > Just because I have a mortgage and a credit card doesn't mean I can't survive without them. You could definitely survey without them, the same way you could survive without a car or a smartphone. A mortgage in particular is undeniably useful for many people.

sushsjsuauahab 5y ago
Only because housing prices have been artificially inflated? I can prove how they are, but curious to know if you agree they are. Finance is a bandaid for deeper issues.
- icebraining 5y ago
  Only because they have been artificially inflated? That seems unlikely; the materials and labor costs alone would take multiple years to pay off by an average family. Being able to move in immediately seems useful, even if currently we're paying way too much for it.
- smabie 5y ago
  I mean finance has existed for thousands of years. What are these deeper issues? Whatever they are it seems unlikely they are ever going away.

FabHK 5y ago

> What does the world gain from finance? Not sure whether you're asking seriously, but while there is a lot of scamming and rent seeking in finance (which is why it is subject to heavy regulation), it does provide many functions: 1. transfer of purchasing power through time (by saving/credit) 2. proper valuation 3. facilitation of investments (for companies, infrastructure, etc.) 4. investment allocation 5. risk transfer and management etc. All valuable functions. > most of us are actually and literally creating something out of nothing Your labour and your computer and the electricity used to run that computer etc. are not nothing. The economy has always been about creating something more valuable out of inputs that are less valuable. Nothing new here.

neilwilson 5y ago
"transfer of purchasing power through time (by saving/credit)" Except that isn't true because banks create money when they advance credit and always have done. There is no transfer. There is a liquidity provision that aims to offset the drain of liquidity to financial savings. The two don't necessarily match, and mostly they don't, with a system tendency towards net financial saving. Purchasing power is improved by banks because they take things that are not liquid and provide a more liquid instrument in exchange. In that sense they are not that much different from market makers.