Comment by toolz | Hacker News Reader

Comment by toolz | Hacker News Reader

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personally I think this is a signal that our financial system is too absurd. I strongly doubt anyone would think "this seems reasonable" if we all didn't hear stories of people winning millions on options trades. I personally know a young engineer that went all-in on tesla plays and a few years ago had taken ~100k to >6MM. The guy had never bought a single stock before he got into tesla.

What is the root of all this ridiculous finance? The stock market seems to be the most ridiculous thing that has been around so long that it's considered normal, but is our inflationary, high risk high reward economy really optimal for society? We're in a spot now where the wealth gap is staggering, yet 100% of the american billionaire classes net worth wouldn't even fund the federal government for a year.

Something seems very off about all of this and I suspect that's why we see the symptoms of otherwise intelligent people falling for money scams all the time. We've simply put way too much social energy into making finance complex and I worry that we're continuing down a wrong path by demanding more complex safeguards, insistent that we can solve the problems with policy.

I readily welcome the fact that all of this is so complex that I don't have a strong grasp on it though and with that my intuition isn't worth much, but the few people I've met that claim to have a firm grasp on our economic drivers haven't been able to make predictions worth anything noteworthy and that's worrying to me. If the most educated people you know in finances and markets are markedly under-performing compared to congress members, this complexity does not seem to be something benefiting the people it should be benefiting.

> We've simply put way too much social energy into making finance complex

What does "social energy" mean here? Human intellectual effort? Finance represents the complexity of the economy and societies - it's basically a model for understanding and rationalizing the economic activity going on. It can definitely become unmoored from fundamentals, but then have a correction, though.

> and I worry that we're continuing down a wrong path by demanding more complex safeguards, insistent that we can solve the problems with policy.

What's the alternative? What is the non-policy tool? Let it run without safeguards until it destroys more of the financial security of average people?

That's what's happening in the crypto world now. Perhaps we don't regulate it and the examples in the article serve as warnings to others?

However, if we do that with the broader stock market, I suspect it'll exacerbate the wealth gap issue you lament, unless your idea is to accelerate toward an financial and societal collapse/reset, which comes with arguably worse side effects.

> However, if we do that with the broader stock market, I suspect it'll exacerbate the wealth gap issue you lament

the most widely used cryptos either have fixed inflation or noteably no inflation with bitcoin.

These are merely a ton of correlations, but it's hard to imagine the wealth gap getting worse under a non-inflationary, trickle down economic model. The trickle down model might work with non-inflationary currency, but it seems obvious to me that it doesn't work in our current system where the bankers get the most value from the dollars its allowed to create and it loses value as it moves towards lower income pockets.

https://wtfhappenedin1971.com/

> it's hard to imagine the wealth gap getting worse under a non-inflationary, trickle down economic model

Trickle down economics has exacerbated the wealth gap, as demonstrated by large scale international retrospective studies of its effects [1]. Given that, it's hard to imagine how making things more trickle-down would improve the wealth gap.

1. https://thehill.com/changing-america/respect/poverty/530731-...

The paper the article links doesn't seem to address inflationary trickle-down economics. You have to have a theory as to why it doesn't work. Simply showing it doesn't work doesn't really show why it doesn't work.

I think a logical hypothesis is that it doesn't work to lessen wealth inequality is because first movers advantage. In an inflationary economy the first people to touch the money get the most value of it as it loses value over time. In a deflationary economy this would flip and I'd argue that's exactly what we need to happen. There is no such thing as someone who sits around hoarding wealth at a macro scale. This is made obvious by the fact that it takes roughly 3 generations for families to lose their wealth.

Sure, maybe the frugal entrepreneur holds or invests, but that person will die and give it to someone who values money less as they didn't earn it. They will likely spend the money and so-on until the money has been injected back into circulation, with each step of the way that money gains value, which means that money is worth the most when it reaches the producers/workers.

> The paper the article links doesn't seem to address inflationary trickle-down economics.

Inflationary trickle-down (AKA supply side) economic policy is exactly what we've had since the 1980s (even from the parties on the left), so I don't know what else it would be addressing. Before that we had inflationary demand side economics.

We've not had a significant deflationary period in the US, but Japan has, due in no small to their historical resistance to allowing immigration. It's not clear that the US can or should follow their model.

I agree it's not clear, but speaking specifically to japan, check out their income inequality https://twitter.com/jmschles/status/564624643781189632

It seems like maybe a datapoint in favor of the hypothesis I presented, at least. I can't get past the WSJ paywall, though, unfortunately.

Congress members are probably over-performing because of insider trading.

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