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The job of secondary financial markets is to redirect areas of surplus unproductive wealth (that makes no return), to productive areas. By the magic of markets,

The job of secondary financial markets is to redirect areas of surplus unproductive wealth (that makes no return), to productive areas. By the magic of markets, sustained profitability = productive use of resources. The problem with labourers who work in these secondary markets however, is the same as the guards who watch the gate: they can extract large tolls for being in the right place at the right time. People in finance are rich because they're well-placed to skim highly productive traffic. However, it is -- in the vast majority of cases -- only skimming. The system functions very well to take unproductive surplus and allocate it effectively. Though admittedly today, the larger beneficiaries are increasingly monpolies, and so on. But this isnt a side effect of the finance industry, but of the state.

lordnacho 2y ago
> The system functions very well to take unproductive surplus and allocate it effectively. How do you quantify this?
- mjburgess 2y ago
  feels^2 But also, profit margins of major industries; amount of wealth held liquid; and so on. You might have a moral idea of 'effective' in mind, which may not be realised. I mean only that one does not find cash lying around the vautls of the ritch -- as in pre-modern times. People do not bury gold as jesus advised. Rather they dont keep gold, it is a line item held by a business doing something with it.
amelius 2y ago
I've heard this many times, but where is the proof? How would you apply it to the story of OP?
bell-cot 2y ago
This...but a twisted, bloated, incompetent, and malevolently self-serving version of it. Actual efficiency would dictate that there be only a relative handful of finance jobs, let alone very well-paid finance jobs. And that the vast majority of the money go to actually productive industries. And that the financial markets understand the principles and timescales of other industries, so they don't screw everything up with decisions equivalent to "Fiscal quarter ends in June, and Farmer Jones says he can harvest zero corn by then. Shut him down."
vladms 2y ago
> Though admittedly today, the larger beneficiaries are increasingly monpolies, and so on. But this isnt a side effect of the finance industry, but of the state. For markets to exist, monopolies must be avoided. As you can't expect large companies to police themselves, this was generally the role of the state. The states must strike a balance between keeping large companies happy (that want monopolies and have cash today) and true markets (which are efficient on the long run). The finance industry is probably just a side effect of everybody focusing on short term (both public traded companies and politicians/states)
yobbo 2y ago
> The system functions very well to take unproductive surplus and allocate it effectively. What did you measure to come to this conclusion?
- rich_sasha 2y ago
  In much of the developed world, economic productivity seems to correlate strongly with availability of free capital (I don't have a source but I imagine it's fairly straightforward to cook one up). Even US vs Europe, kind of similar economies, but with capital so much easier to come by in the US, and US productivity per capita is flying compared to Europe. Availability of free capital is a function of both just general wealth of a society, and how well lubricated the wheels of finance are. I don't think this is a controversial theory, even if it comes with unpleasant side effects (white collar crime, inequality etc). Just as having a buoyant defence industry that can churn out a lot of boom is great for a country's war fighting potential.
  - Dalewyn 2y ago
    It's essentially the willingness of a society to fund what looks like and could actually be a complete waste of time and money. In the US there's plenty of money to throw on seemingly frivolous pursuits, because stagnant money is generally considered wasted money. It's considered better to have that money "working for you" invested in something, anything. You could lose out, you could also win big, at least you tried. Can't have omelets without cracking eggs, as the saying goes. Another Europe-like example is Japan: A rich society with lots of money, but society doesn't want to waste it. So most of the money is stagnant, stored in deposit accounts or in a bedroom drawer (literally, see: Tansu Yokin[1]) instead of being invested in something consequently leading to a stagnant economy. [1]: https://www.seattletimes.com/opinion/a-nations-character-revealed-in-thrift-and-resilience/ https://www.seattletimes.com/opinion/a-nations-character-rev...
    - mitthrowaway2 2y ago
      Money in a drawer doesn't really detract from any national investment. It's just paper. It's the allocation of capital that matters. Land, machinery, and so on. The extent of this is that if money sits in drawers not being spent, it represents diminished demand, which suppresses prices; the government can then print a corresponding amount of money to allocate capital towards other purposes. Leaving money in the drawer means delaying until another day your vote for how national resources should be allocated.

lordnacho 2y ago

> The system functions very well to take unproductive surplus and allocate it effectively. How do you quantify this?

mjburgess 2y ago
feels^2 But also, profit margins of major industries; amount of wealth held liquid; and so on. You might have a moral idea of 'effective' in mind, which may not be realised. I mean only that one does not find cash lying around the vautls of the ritch -- as in pre-modern times. People do not bury gold as jesus advised. Rather they dont keep gold, it is a line item held by a business doing something with it.

amelius 2y ago

I've heard this many times, but where is the proof? How would you apply it to the story of OP?

bell-cot 2y ago

This...but a twisted, bloated, incompetent, and malevolently self-serving version of it. Actual efficiency would dictate that there be only a relative handful of finance jobs, let alone very well-paid finance jobs. And that the vast majority of the money go to actually productive industries. And that the financial markets understand the principles and timescales of other industries, so they don't screw everything up with decisions equivalent to "Fiscal quarter ends in June, and Farmer Jones says he can harvest zero corn by then. Shut him down."

vladms 2y ago

> Though admittedly today, the larger beneficiaries are increasingly monpolies, and so on. But this isnt a side effect of the finance industry, but of the state. For markets to exist, monopolies must be avoided. As you can't expect large companies to police themselves, this was generally the role of the state. The states must strike a balance between keeping large companies happy (that want monopolies and have cash today) and true markets (which are efficient on the long run). The finance industry is probably just a side effect of everybody focusing on short term (both public traded companies and politicians/states)

yobbo 2y ago

> The system functions very well to take unproductive surplus and allocate it effectively. What did you measure to come to this conclusion?

rich_sasha 2y ago
In much of the developed world, economic productivity seems to correlate strongly with availability of free capital (I don't have a source but I imagine it's fairly straightforward to cook one up). Even US vs Europe, kind of similar economies, but with capital so much easier to come by in the US, and US productivity per capita is flying compared to Europe. Availability of free capital is a function of both just general wealth of a society, and how well lubricated the wheels of finance are. I don't think this is a controversial theory, even if it comes with unpleasant side effects (white collar crime, inequality etc). Just as having a buoyant defence industry that can churn out a lot of boom is great for a country's war fighting potential.
- Dalewyn 2y ago
  It's essentially the willingness of a society to fund what looks like and could actually be a complete waste of time and money. In the US there's plenty of money to throw on seemingly frivolous pursuits, because stagnant money is generally considered wasted money. It's considered better to have that money "working for you" invested in something, anything. You could lose out, you could also win big, at least you tried. Can't have omelets without cracking eggs, as the saying goes. Another Europe-like example is Japan: A rich society with lots of money, but society doesn't want to waste it. So most of the money is stagnant, stored in deposit accounts or in a bedroom drawer (literally, see: Tansu Yokin[1]) instead of being invested in something consequently leading to a stagnant economy. [1]: https://www.seattletimes.com/opinion/a-nations-character-revealed-in-thrift-and-resilience/ https://www.seattletimes.com/opinion/a-nations-character-rev...
  - mitthrowaway2 2y ago
    Money in a drawer doesn't really detract from any national investment. It's just paper. It's the allocation of capital that matters. Land, machinery, and so on. The extent of this is that if money sits in drawers not being spent, it represents diminished demand, which suppresses prices; the government can then print a corresponding amount of money to allocate capital towards other purposes. Leaving money in the drawer means delaying until another day your vote for how national resources should be allocated.