Try to think a little about what you’re saying. Suppose you were to shut down all stock markets worldwide. What do you think would happen? Do you not realize you’ve made the world a poorer place by forbidding people from trading equity?
So the entire stock market consists of people trading paper. It is a game of people trying to buy paper at a low price and sell it at a higher price. HFT is people taking computers into this game.
Now lets look at a market that produces true utility. I am a farmer and I grow apples. You are a farmer who grows oranges. I want oranges you want apples, so we exchange products with genuine utility as we both can eat the products and both enjoy and sustain ourselves.
The only time where utility is created in a stock market is during an IPO when stocks are issued. All other transactions after that are typically a waste of energy and resources. If I could redirect all that compute capacity used for HFT towards protein folding we'd actually be creating utility rather than tossing it into the void.
You can borrow against it (it's called "margin"). People do it all the time.
The utility of a stock market is providing a nearly frictionless method of moving capital to its most efficient use.
It's as great an invention as money is - suppose you want a toaster, but the toaster company doesn't want apples. Good luck setting up an n-way barter with the orange farmer and several other people to try and get a toaster.
A simpler answer is if the stock market had no utility nobody would trade stocks. But they do, millions do. Are they all fools, or have you made a mistake?
>You can borrow against it (it's called "margin"). People do it all the time.
You can borrow against cash as well. Though usually when you borrow against cash you're buying a house to live in rather than borrowing more useless paper stocks to sell at higher prices. Basically you are borrowing money to use at a casino when you use margins. Imagine an entire economy built around casinos. Would that economy be productive? No. The exchange of money in casinos intrinsically does not involve the creation or exchange of goods. Where would all of our GDP go if an economy consisted of only casinos? It would go to shit. Same if the economy consisted of only stock markets. But if the economy consisted of only farms...? well, food has utility.
The infrastructure surrounding casinos is similar to the server farms mining bitcoin and polluting the air. It's a questionable use of capital.
>A simpler answer is if the stock market had no utility nobody would trade stocks. But they do, millions do. Are they all fools, or have you made a mistake?
Do not underestimate the power of human stupidity. Let's say I have an scheme for making money. I'm going to print out a bunch of useless paper and start selling that paper for 100x what its worth. Then I have another idea... as little as it is, paper actually has some value so I can optimize this scheme by making a digital platform for selling these pieces of paper as pieces of encrypted information. I call the first piece the genesis block.... aka bitcoin.
Make no mistake, the utility of a bitcoin is equivalent to the utility of a counterfeit dollar and their origins are identical: both were created out of thin air. You have to be pretty dumb to buy a piece of paper at 100x the price let alone an abstract digital representation of that paper (bitcoin). Yet people do buy bitcoin and they do make money off of it. It's collective stupidity that allows an individual to profit... from a broader perspective, however, no actual utility is generated off of the mining of bitcoin just like how no utility is generated over the exchange of stocks.
I know that's what you're saying. And you are utterly wrong.
> Do not underestimate the power of human stupidity.
I.e. you're smarter than everyone in the financial markets. If you're right, you'd get a Nobel Prize in economics. But I suppose the Nobel committee is too stupid to do that, too :-)
> I'm going to print out a bunch of useless paper and start selling that paper for 100x what its worth.
Go right ahead and do that. There's no law against it. Please post back how that works out.