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I watched this video a while ago, so I don't remember it exactly, but there is clearly something dubious behind the money-creating power governments give to ban

by gduffy 18y ago

I watched this video a while ago, so I don't remember it exactly, but there is clearly something dubious behind the money-creating power governments give to banks. As a society, we do want to grant promissory notes to encourage growth. However, banks, as commercial entities, quickly run away from simple, society-uplifting investments to derivatives and subprime credit. As rational businesses they are motivated to grow, so the value/paper ratio goes steadily down as they expand. There is clearly something missing in the equation, and I think the video hints at it nicely. Something is wrong when the rules of the business encourage banks to make increasingly lower value loans over time. And bailouts make them even less likely to be prudent with the power we give them.

Devilboy 18y ago
I feel very uncomfortable with all the financial derivatives - and derivatives of derivatives and so on. It becomes so abstract that it loses connection with what is going on in the real world processes. It seems counter-productive to me.
- iigs 18y ago
  I feel that way as well, and I assumed I was ignorant or stupid because I couldn't make sense of it... then October hit and it became obvious that a large number of companies that made their fortunes on this system also did not or could not understand the whole thing either. It was kind of reassuring in a "you're smarter than you let yourself think, but not smart enough that your house isn't underwater" way. The last time I felt this way was in the mid-late 90s sitting on the porch with my dad in rural Nebraska. We couldn't figure out why so many tech companies were darlings of the stock market. And sure enough, while there was some (read: substantial) lasting value in the internet business, there were a lot of really stupid dot coms that didn't bring anything to the table. I believe that there's a large amount of capital seeking returns right now. That is to say, I think at this stage of the world's economic evolution many organizations have obligations to invest large amounts of money, and that there's some ratio of money to real work that is off kilter possibly. For this reason I think tech and the financial bubbles represent a class of problem that we're going to see repeat itself (irregularly) going forward. It would sure be nice to be able to capitalize on it, somehow. :)
davidw 18y ago
Something like this, from the Financial Times' chief economist, Martin Wolf, might be a better treatment of what's wrong and how to fix it: http://en.wikipedia.org/wiki/Fixing_Global_Finance http://en.wikipedia.org/wiki/Fixing_Global_Finance The Economist has been dedicating a lot of space to the topic as well. Neither one of them advocates throwing the baby, bathtub, and one's self out of the window.

by gduffy 18y ago

Devilboy 18y ago

I feel very uncomfortable with all the financial derivatives - and derivatives of derivatives and so on. It becomes so abstract that it loses connection with what is going on in the real world processes. It seems counter-productive to me.

iigs 18y ago
I feel that way as well, and I assumed I was ignorant or stupid because I couldn't make sense of it... then October hit and it became obvious that a large number of companies that made their fortunes on this system also did not or could not understand the whole thing either. It was kind of reassuring in a "you're smarter than you let yourself think, but not smart enough that your house isn't underwater" way. The last time I felt this way was in the mid-late 90s sitting on the porch with my dad in rural Nebraska. We couldn't figure out why so many tech companies were darlings of the stock market. And sure enough, while there was some (read: substantial) lasting value in the internet business, there were a lot of really stupid dot coms that didn't bring anything to the table. I believe that there's a large amount of capital seeking returns right now. That is to say, I think at this stage of the world's economic evolution many organizations have obligations to invest large amounts of money, and that there's some ratio of money to real work that is off kilter possibly. For this reason I think tech and the financial bubbles represent a class of problem that we're going to see repeat itself (irregularly) going forward. It would sure be nice to be able to capitalize on it, somehow. :)

davidw 18y ago

Something like this, from the Financial Times' chief economist, Martin Wolf, might be a better treatment of what's wrong and how to fix it: http://en.wikipedia.org/wiki/Fixing_Global_Finance http://en.wikipedia.org/wiki/Fixing_Global_Finance The Economist has been dedicating a lot of space to the topic as well. Neither one of them advocates throwing the baby, bathtub, and one's self out of the window.