The Nature of Modern Finance


[a] 1850 is maybe not what one wants to emulate in terms of growth but rather 1950 — at least in my naive perspective I think of 1850 as factory growth without much benefit to the Dickensian factory workers. Triangle shirtwaist factory etc. Whereas I think of 1950 USA as being big, effective corporations that would take a body in (at least a white male body) and make him productive and decently compensated for life. Just because a lot of the ideas of the industrial revolution came from the mid 1800’s does not mean that the implementation was all there, as we can see from a century of earnings and wages growth well after the invention of the revolutionary technologies.

[b] Second, 40% of the U.S. economy does not necessarily mean U.S. industries are being squeezed out. It could be that the U.S. is just very globally competitive in that particular industry, and the growth is instead coming at the expense of other countries which don’t for example print the world’s most important fiat currency.

I’m not saying Kwak & Johnson are wrong, those are just obvious questions I would like answers to.

The Baseline Scenario

Is modern finance more like electricity or junk food?  This is, of course, the big question of the day.

If most of finance as currently organized is a form of electricity, then we obviously cannot run our globalized economy without it.  We may worry about adverse consequences and potential network disruptions from operating this technology, but this is the cost of living in the modern world.

On the other hand, there is growing evidence that the vast majority of what happens in and around modern financial markets is much more like junk food – little nutritional value, bad for your health, and a hard habit to kick.

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About isomorphismes

Argonaut: someone engaged in a dangerous but potentially rewarding adventure.
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