Comment by jsemrau | Hacker News Reader

Comment by jsemrau | Hacker News Reader

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> The financial world is absolutely ripe for an overthrow...

No it is not. Regulation in Financial Services exists for a very good reason. To protect you the customer against the various kinds of risks.

When you run a company and borrow a significant amount of money from a lender you do not want that this lender changes terms half-way through because they are in trouble re-financing their portfolio. The same applies to due-diligence in credit underwriting. Social scoring was hailed as the future of credit origination but it does not work at all (yet). No social characteristic is correlating at to defaults.

What if you deposit your life savings or life insurance with a fintech startup and they do not survive (for whatever reason). Then what?

There are a lot of businesses out there relying on a stable financial systems. Fintech companies will work with established players to bring faster technical implementations and MVP's for banks to implement. After they have done their technical due diligence. Beyond that I am more than doubtful.

Oh come on. Did the regulation in the financial system protect "the customer" against a massive loss of jobs and against having to subsidize a bailout of the entire industry in 2008? Did it protect people from banks who were betting against them(Goldman Sachs.)?

I have news for you all of these exotic and toxic investment vehicles that these investment banks cook up, largely because a previous loophole was close are essentially high flying risky startups inside the context of the bank.

Deposits and retirements savings did not survive in the last financial meltdown and this had nothing to do with fintech, these were white-glove investment houses. So yeah people do want protection, protection against this established racket. The established racket is the largest offender.

> Did the regulation in the financial system protect "the customer"

You mean the Glass-Steagal regulation that was repealed prior to the crisis?

I wasn't referring to Glass-Stegal but rather the collusion between the the banks and the ratings agency, or banks selling products to investors and then betting against them.

Glass-Stegal would however further my point, its the regulatory capture in the financial industry that allowed that to happen, and by that I mean appointing an investment banking executive from Wall Street to head the Federal Reserve.

Repeal of the Glass-Stegal Act was not the cause of the 2008 crisis! Also Glass-Stegal was never regulation to protect individuals. It had nothing to do with customers. Glass-Stegal did allow big banks to get much bigger but it was not about protecting individuals. Glass-Stegal forbid commercial bank from becoming investment banks. The crisis in 2008 was caused by subprime lending, complicit ratings agencies and a derivatives market that speculated against those loans. Glass-Stegal would not have prevented this! I wish people would stop propagating this misinformation. The only reason its relevant to the crisis is because it allowed banks to become "too big to fail", not because it would have prevented banks the players from engaging in reprehensible behavior.

Thanks! This is informative.

>Oh come on. Did the regulation in the financial system protect "the customer"

Yes it did. Nobody lost money in their savings or current accounts in commercial banks (Except Iceland)

What happened in the stock market was different but the core of the FSA/FCA is about protecting customer's money which they did. (See how they were able to ensure none of Northern Rock's customers lost money in the UK).

Maybe people didn't lose their savings in the last meltdown but can I remind you how maybe people have lost a significant amount of their savings overnight by their governments and the bad monetary policies those governments pursued? The devaluation overnight of the Argentine Peso(where incidentally Bitcoin is very popular), the devaluation of the Thai Baht. These are all incidents where people went to bed and woke up much poorer than they were the day before. How about the unsound policies of Zimbabwe(do a google search for a Zimbabwe 100 Trillion dollar bill) and Venezuela that leads to devastating inflation? These were the result of politics and monetary policies that were enacted in the pursuit of those politics. Crypto currencies turn all of this interventionism on it's head.

I don't really understand the other guys' argument, but I don't necessarily agree with you either.

In my opinion, bitcoin will be overtaken by another coin, most likely ethereum. This is because while bitcoin has many issues, the underlying tech (blockchain) is sound.

The reason ethereum will succeed is because it is not just a currency. It's not even mostly a currency. It is a decentralized network that gives users the ability to engage in trustless programmatic contracts.

Decentralized, meaning that no one person has the ability to tamper with important documents or files.

Programmatic in that contracts are actual programs that get run at a predetermined time.

And trustless in that some third party mediator isn't required to enforce terms. This point is the most important because it means that organizational structures that simply would not be feasible otherwise are possible.

Organizations as we know them today are necessarily built like pyramids (governments, large corporations) or they are kept very small for mobility (startups). With trustless organizations, this won't (always) be true anymore.

And with the momentum of these features, I could see Ether (Ethereum's currency) dethroning Bitcoin. It's already got a fifth of the market cap that BTC has.

You argument is based on 'finance' continuing to exist and trying to regulate it into some notional form of sanity.

Can you wrap your head around getting rid of the system completely? 'Money' is an artificial numerical system of tokenised management that fundamentally limits our progression as a race. We can't repair roads, fund disease treatment, build structures to house our sick or educate our children, distribute food to the needy because the 'numbers' don't let us. The concept of finance is thrust upon us from birth and we're all but incapable of seeing what a stupid system it really is.

Fundamental misunderstanding of what money is. It's an abstracted version of time and labour, allowing for transmission of from one person to another.

Example. I work x hours and get paid y tokens. y tokens thus equals x hours of my work. I now go and buy a cutlery set. That was produced by n people over m hours, and is sold with p profit. My y tokens is equal to n * m + p, which is equal to x * y.

Money exists to make the n * m + p = x * y things workable. It's an abstracted barter system, where rather than having to work in Sony's programming department to earn a new TV, I can write code for other people, get paid something, and then pay it to Sony, who can equate it to the cost of a TV.

The doing all the things you talked about in the second paragraph is a management and distribution of labour issue, which is down to society and governance. There's many nations that manage those things fine, and have financial systems. The issue is with a society that isn't able to provide those things, because the values held and the outcomes desired are fundamentally opposed.

If you want to fix something, get involved in local politics and make a difference.

I don't diagree with anything you said, but your rationalisation of why we have the current system is based on the premise that we have to have the current system.

Overthrowing the system isn't on my bucket list, but it makes for an interesting debate - eg: https://medium.com/@RickWebb/the-economics-of-star-trek-29ba...

I'm not saying we have to have it. Post-scarcity economics are great, once you've got effectively limitless production capacity. Without that, you've got to have a way for people to exchange goods and services.

Post scarcity isn't just about production, it's also about logistics, everyone forgets that.

Sure, but if you've got essentially limitless production, you must have de facto solved logistics too. (I can't imagine a scenario where you get production without the infrastructure)

That doesn't follow. One can easily imagine a situation in which the US or Western Europe are post-scarcity but the rest of the world isn't.

If you don't have the ability to near-instantaneously "spike" your production to meet demand, then you have an opportunity for arbitrage. At least a time-based one.

Additionally, if you do have over-abundant capacity to pre-manufacture well above that required "spike", then you need to a) use logistics to get it there and b) foresight of knowing where you need to get it to, and how much of it.

Otherwise, you'd have to have the ability to produce any arbitrary amount of it at the desired location when the need requires. By it, I generally mean all products.

> If you want to fix something, get involved in local politics and make a difference.

That's a massively oversimplified perspective on the completely broken political systems most of us in western psuedo-democratic nations live in, whereby resolving a lot of the systemic issues requires a lot more than a single individual getting involved in local politics.

Single individuals involved in local politics begins the process of change in a small group, which can beget change in a larger group.

Better to be involved and work towards the change you want to see, than to throw your hands up and despair over the "broken political system of our western psuedo-democratic nations".

That's the point of democracies - they only work when people effectively engage. Most people don't, but that's not a failure of democracy, it's a failure of society. History is rife with examples of single individuals and small groups who made massive change over time. The American civil rights movement, the Indian independence movement, the anti-Apartheid movement in South Afica...

You can work to make change and then bemoan anything you want, but if you choose not to engage, your words lack authenticity and merit.

Fair!

"It's an abstracted version of time and labour, allowing for transmission of from one person to another."

How does that translate to the billions that hedge fund managers "earn".

They spend their time engaging in an activity (labour), for which they're given financial reward. Just because you don't equate what they do with work, doesn't mean that it doesn't follow the same rules. They just get vastly more for their labour than other people.

Money is a store of value, nothing more. It could be gold, a piece of paper, a coin, an apple, it doesn't matter. It does not represent time and labor. It could be equated with time and labor but that is not what defines money. I think you may have a fundamental misunderstanding.

Money is a store of value, nothing more.

Not quite:

"Money's a matter of functions four,

A Medium, a Measure, a Standard, a Store"

Well I think a medium and a measure are implicit in a store, otherwise you couldn't store them. A standard can be rather loose, when people were using wampum, beaver pelts or cowry shells as money those items weren't all of the exact same, size, shape or color but it was understood that they were a store of value.

I would beg to differ. The monetary system might be described as something that is trying to abstract time and labour in the way you describe. But money itself is just a token of exchange.

The monetary system, is an attempt to use money, and market price setting to solve the problem you describe - and that problem is essentially NP complete, so what markets and market price setting, in conjunction with an enormous number of local decisions made in response to those price signals are doing is trying to find a reasonably efficient approximate solution.

It's an untested assumption that the monetary system can actually do that without any regulation. There are good reasons to think that it can't, especially over long periods.

Completely agree about the involvement in local politics - it's easy to be an armchair economist, and ignore the reality that at the end of the day the single most important government function is that the garbage is collected regularly.

I can wrap my head around a lot of things. But I value realistic pragmatism over ivory tower logic. There are real people in an real economy who want real compensation for their works to fix roads, do research, or construct things.

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