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Any system that socializes losses to parties that are not embarking in the risk/profit is going to be exploited. Period. This is not just about finance. It's a

by csomar 4y ago

Any system that socializes losses to parties that are not embarking in the risk/profit is going to be exploited. Period. This is not just about finance. It's a leak. Anything that can leak for profit, will eventually leak. These attacks (and I don't mean you personally) to the free market (and derivative products) are dangerous. If the "free" market fails because it's not so free after all(socialized losses), you don't fix this by having more bureaucrats/politics involvement to run the markets. This will only make matters worse. The proliferation of politics in the markets, because of that, is also accelerating. The argument is now readily available (look at how these complex derivatives products are destabilizing the market!). This will lead to more chaos in the market, more dysfunction and more organized thefts of the market (if not from smart mathematicians than from politicians/bureaucrats) and eventually to a military rule. We've been there a few decades ago. It's sad what's happening now.

deleted 4y ago
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barrkel 4y ago
> If the "free" market fails because it's not so free after all(socialized losses), you don't fix this by having more bureaucrats/politics involvement to run the markets. This will only make matters worse This is deeply naive. Governments that don't take action when pension funds evaporate en masse will fall and be replaced by those which do take action. If this didn't happen, it would be a failure of democracy, not of markets. Such a government would be illegitimate - and on-topic, that's pretty much where the UK government is at right now, it's pursuing a set of policies it has no electoral mandate for and is currently 33% behind the main opposition.
- gmac 4y ago
  (Yes — and it feels like we have a systemic problem when the people have no way to get rid of a government this unpopular — except relying on them to do the decent thing and bow out, which this bunch, having been basically purged by Johnson of anyone with intelligence or principles, will clearly never do).
asdfasgasdgasdg 4y ago
But the public -- pensioners and future pensioners -- are embarking in the risk/profit side of things. We want to fund our pension with less money than we ultimately take out, and additionally have guaranteed outflows regardless of market conditions. To put it shortly, we want profit. The average pensioner may not understand that they were joining in a risky undertaking. Whose fault that is I could not even begin to suggest -- too many possible candidates depending on your world view. But a lack of understanding will avail you little when your counterparty is the fundamental financial reality that there is no free lunch. As annoying as it is that the bankers made a bunch of money, the alternative, where all pension monies go into a savings account, would leave people much less happy.
- ls612 4y ago
  And fundamentally it must be risky. You are engaging in a deal to be paid a sum of money 30 years down the road, there’s 30 years of mandatory uncertainty and risk involved with that deal. With defined contribution plans at least the worker observes that risk directly (401k goes up or down) but you can’t, no matter what you do, make it not risky.
boringg 4y ago
Free markets only work for certain markets - and it works in those markets exceptionally well. HOWEVER somewhere in history we decided as a group of people that free markets worked so well for these specific markets that we will apply this ideology to all markets and that will solve the problems of appropriate capital allocation. This is indeed a fallacy and has led to the rampant problems and the perpetuation of the simplistic & naive belief that free markets will allocate capital properly and efficiently and if the free market doesn't its a function that the market isn't free enough.

by csomar 4y ago

deleted 4y ago

[deleted]

barrkel 4y ago

> If the "free" market fails because it's not so free after all(socialized losses), you don't fix this by having more bureaucrats/politics involvement to run the markets. This will only make matters worse This is deeply naive. Governments that don't take action when pension funds evaporate en masse will fall and be replaced by those which do take action. If this didn't happen, it would be a failure of democracy, not of markets. Such a government would be illegitimate - and on-topic, that's pretty much where the UK government is at right now, it's pursuing a set of policies it has no electoral mandate for and is currently 33% behind the main opposition.

gmac 4y ago
(Yes — and it feels like we have a systemic problem when the people have no way to get rid of a government this unpopular — except relying on them to do the decent thing and bow out, which this bunch, having been basically purged by Johnson of anyone with intelligence or principles, will clearly never do).

asdfasgasdgasdg 4y ago

But the public -- pensioners and future pensioners -- are embarking in the risk/profit side of things. We want to fund our pension with less money than we ultimately take out, and additionally have guaranteed outflows regardless of market conditions. To put it shortly, we want profit. The average pensioner may not understand that they were joining in a risky undertaking. Whose fault that is I could not even begin to suggest -- too many possible candidates depending on your world view. But a lack of understanding will avail you little when your counterparty is the fundamental financial reality that there is no free lunch. As annoying as it is that the bankers made a bunch of money, the alternative, where all pension monies go into a savings account, would leave people much less happy.

ls612 4y ago
And fundamentally it must be risky. You are engaging in a deal to be paid a sum of money 30 years down the road, there’s 30 years of mandatory uncertainty and risk involved with that deal. With defined contribution plans at least the worker observes that risk directly (401k goes up or down) but you can’t, no matter what you do, make it not risky.

boringg 4y ago

Free markets only work for certain markets - and it works in those markets exceptionally well. HOWEVER somewhere in history we decided as a group of people that free markets worked so well for these specific markets that we will apply this ideology to all markets and that will solve the problems of appropriate capital allocation. This is indeed a fallacy and has led to the rampant problems and the perpetuation of the simplistic & naive belief that free markets will allocate capital properly and efficiently and if the free market doesn't its a function that the market isn't free enough.