Sunday, January 18, 2009

Why finance?

Good question (again)? Even if we can answer this for the function, we have to ask for what do we need the leeches of finance (that is, the collection of non-essential gamers)? From whence comes the rationale for 7-figured, and socialized, pay for the supposedly best-and-brightest (ah, yes, the favored) while the majority eat crumbs?

Well, earlier we were going to look at money and its use in an economy. But we got way-laid as things falling apart took our interest away. Well, finance has several roles in this matter but has really become too warped for its own good.

That the evolution in finance resulted in a small set, comparatively, of people becoming super-rich while the vast majority find themselves decimated tells us a lot. Recent events just keep adding to the arguments for a need to look at this whole thing more clearly.

One metaphor (medically inspired) that would be apropos is that money is like blood to the body of the economy. So, we see use of words like liquidity. Now, in a sense, finance is supposed to be the flow system, and we use human circulation as an example.

You see then that the financial leeches mainly suck out the value. All sorts of reasonable economic argument supposedly supports this framework; well, that is not true as we will see.

Another role for finance is that played by the CFO who is supposed to help a company handle its money well. Again, what has evolved here, in many cases, is the use of money to not be excellent in the particular product or service area, of the company, but to game the system for exorbitant returns (2 cases).

That this type of game is allowed needs serious consideration.

Then, we have folks trying to support themselves, and their future, from their work who, once they get to the feeble state, are being trashed by pension handlers who are probably after glory more than trying to help their pensioners, in many cases, and who think that the gaming method is it. Hah!

Of course, that Social Security has ponzi-ed (made-off) itself over the years just shows how deeply ingrained is all this foolishness.

Marx is laughing at the supposed epitome of capitalism which is only a pseudo-casino in reality.


11/07/2012 -- Another new age is upon us. Well, not for a couple of months. We just had the vote yesterday. One has to think of all of those things left undone during the last four years in the context talked about above (which was written about four years ago). What will the next four years bring? Can we list the undone and talk what ifs? Perhaps.

01/27/2010 -- It's really ca-pital-sino.

11/06/2009 -- There ain't no train, just like there ain't no free lunch (TANSTAAFL).

08/02/2009 -- Wait! More exposures: "computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else's expense." To anyone who isn't at Goldman Sachs or the like, does that appeal to you as the way that we ought to be handling our beans?

So, is this what financial engineering is all about? Sounds more like leeching.

05/18/2009 -- Oh yes, got us in a mess and still wants the bonus.

03/30/2009 -- The WSJ today looks at the Future of Finance. The idea is that finance is like the cardiovascular system. Okay. So leeches are a good metaphor for the sucking out that we see. Like the AIG guy who was central to the losses that we the taxpayers are paying and who left with $300M. We'll be referring back to this discussion.

03/11/2009 -- We also need to look at accounting's role messing up affairs.

01/28/2009 -- Poster boys, et al, motivate.

01/27/2009 -- This week the Economist has a series of articles on the 'Future of Finance' (several articles, all are a must read).

01/27/2009 -- Two aerospace cases to look at in depth. For one, the IPO never happened. For the other, only partial offsetting of debt happened. Both offer a lot to understand what when wrong with financial thinking (engineering and otherwise).

01/26/2009 -- The finance industry seems to have a problem with entitlement, to wit Merrill Lynch paying bonuses with our taxpayer money. We have to ask in relation to this discipline (oh, perhaps wrong word): what the hell happened?

01/26/2009 -- As described a year ago, things continue to fall apart. "You see, this scenario dreamt about by Adam Smith has descended into a computationally based mayhem which has lost its mathematical, political, and spiritual basis and upon which there cannot be a sustained economy. The corpses of the system litter the landscape."

01/23/2009 -- A lot of financial advice is given from an abstracted basis. Perhaps, this is as it needs to be, we'll look at that. But, in terms of cohort-ness and experience, one who has actually been retired for awhile ought to be able to, though not necessarily, speak about the issues better than some view based upon a hypothetical framework.

01/22/2009 -- A new day. It may do well to list the roles played within the financial realm. We know that banking is (can be) respectable. What about that role labeled financial adviser? Do they just hype structures and instruments?

Modified: 11/07/2012

1 comment:

Anonymous said...

Yes, much can be traced to the forces released by the gaming of derivatives. These are by no means necessary; on the contrary, they are a main source of instability.