Comment by bawana | Hacker News Reader

Comment by bawana | Hacker News Reader

Refragmentation is the result of the fungibility of money. When we wanted to make things (stuff people could use to make war or make a better life) money was spent to make those things. Like the water cycle, money would be transformed from one phase into another so that work could be accomplished that directly impacted humanity. But we have short circuited that cycle. Now money is being used directly to make more money through financial instruments. People and the stuff that people want are excluded from this new cycle. (Most people anyway) Money goes directly from its production right back into wagers on the production of more money. For example, the currency markets dwarf the actual gdp of the planet.

To restore balance to the ecology of our civilization, we need to make money a tool for humans. By requiring the use of money only for investment in real stuff, we will deflate the artificial valuations that dwarf the real value of human labor. We will necessarily find ways to restore value to human endeavors and new ways to measure the value of human efforts. More people will thus have value to our civilization on this planet. Otherwise, the refragmentation will continue until it reaches its logical conclusion - a scary picture for humanity.

Bold claims. Forgive me for saying so, but your knowledge of finance does not strike me as particularly deep!

Do you not think that use of financial instruments is vital for allocating resources in a world of imperfect information?

For me, their utility and necessity is obvious. If you think about it, making stuff that people want is actually rather complicated. The world is rife with hazards and risk; the intricate supply lines upon which production depends are all vulnerable to disasters both natural and human.

Naturally, those whose business it is to produce things and not to speculate on future events would like to be free of such risks. This is true the source of fundamental demand for financial instruments. All the derivatives markets, and zero-sum game apparatuses exist in order to transfer -- and in so doing compute a consensual value of -- these risks to those who believe they are better informed about reality.

While I understand not wanting to personally engage in this process, I claim that that the world is better that these contracts and exchange machinery exist!

I see little value generated by treating money as an end rather than as a means to an end. Liquidity and better pricing of goods are the classic rewards of that gambler / investor culture. Meanwhile its demerits (like the 2008 financial meltdown) are blithely overlooked.

In fact, now that there's so much automated trading of all manner of financial instruments, there should be no real need for any new tradable vehicles. In fact, if liquidity and accurate stock pricing are the only desiderata of non-equity traders, and these ends are met otherwise, it sounds like we could easily do away with the entire derivative / option markets altogether as being purposeless and overly dangerous, serving only the professional gambler banker and his vain pursuit of gigabucks.

It does not really matter what value any one person sees in it, if people who have the resources to sustain a market want said market they will create it and maintain it.

Remember though that futures / currencies / even stock are just gambling at the end of the day. Its corrupt gambling where some players have much more information than others (and thus it is traditionally just a vacuum of wealth from the poor to the rich) but people are just betting on where profit will emerge with the intent to get some of it when it happens, and through their actions of investment are trying to cause that profit to happen.

@vzcx That is like claiming that the world is better off with heroin. The discovery and manufacture of that drug were a chemical curiosity. Unfortunately, it short circuits the pleasure receptors and people develop all sorts of maladaptive behaviors just to obtain more of that drug. Their behaviors are maladaptive because they are focussed on ONLY obtaining the drug. That drug is no longer useful medically but it continues to be a significant market all on its own. The traditional way of stimulating the pleasure receptors of the brain (which involves work of some kind and usually involves other people and thus imbues those 'other people' with value) is bypassed.

In like fashion, the volume of currency trading has diverted massive amounts of a resource (money) simply into making more money. Those 'priests' managing this activity reward themselves with a trivial fraction (slice off the top) but the amounts are so gargantuan, that these few people become an unattainable anomaly that the 'rest of us' gawk at, and many 'have nots' envy with despair. This inequality is the side effect that people are looking at and writing about, but it is not the real failing of our system. The fundamental flaw is the colossal hoarding of resources (that could otherwise be put to 'good' use - investment in stuff that people need to make and use).

In addition, the measurement and observation of this hoard of money is distorting our perception. When we talk about productivity and GDP, our numbers look passable because we only talk about the dollar amounts. Increasingly, the production and measurement of value is reflecting the 'effort' and 'success' of money multiplying itself. Yet unemployment, average wage, and educational achievement for the 'average American' are falling dismally. How can it be that wages for teachers are so low? How can it be that tuitions are so high? Simple observations like these are the song of Nero heard while Rome burned.

Many people are aiming finance startups at the established finance industry. Some are blockchain based, others are just coming in with lower-end products. I'm not as negative as you appear towards the finance industry, yet I do hope that it will become much more efficient and automated.

Reply on news.ycombinator.com