Dealers profit from market inefficiency, inserting themselves as middlemen and profiting by pushing prices away from their efficient levels. Why not just let ultimate lenders and borrowers meet with technology, obsoleting the "market makers" raising prices because of their profit-seeking motives?
Consider this quotation from the Seattle Innovation Symposium:
“People say the Internet happened quickly. They’re crazy. It took forever”.
- Bob Taylor, Internet and Xerox PARC pioneer
It’s common for business people to point to the 1990s—specifically, to the 1995 Netscape IPO—as the “beginning of the Internet.” This claim is unsupported by fact. The Internet was “born” in 1968, more than 25 years earlier. Internet pioneers, such as Bob Taylor, in interviews express frustration at how slowly business came to realize the importance of a collection of technologies that we now consider extremely valuable. Internet pioneers worked hard to prove the value of the new technologies, but business took a very long time to “get it.”
Individuals tinkering with things produce innovation. Capitalism is slow to uptake most of the good ideas. AT&T resisted the idea of the internet, because it didn't fit in with their business model of telephones.
Why assume that the only way this could happen is through capitalism? How many individuals thought of doing this, but didn't, because they were under too much stress working for a little Napoleon boss telling them to do something else so he could secure another country club membership? How much does capitalism retard innovation?
To me it's more like: a sign in a store window says "No shirt, no shoes, no service." Another sign below it says "No smoking." The "either" was added to reinforce the "no" part of the two messages. The "no"s convey slightly different meanings, but they're in different contexts. This is something that context-sensitive natural language does all the time.
Your problem may be that you're too used to context-free, formal languages. But the way people communicate everyday is much more expressive.
It's honestly taking advantage of market inefficiencies to profit without contributing any value. It was legal for Magnetar to sell RMBS that they had long CDS positions on, without telling the buyer that.
The modern theory of finance is built on the assumption of perfect liquidity, so that prices can be fully efficient. It is supposed to be arbitrage that creates perfect liquidity by entering to take advantage of even the smallest deviation. To say that liquidity is perfect is to say that liquidity is a free good.
But in a fully efficient market, arbitrage would not be profitable since all bets would be fair bets. So position takers would not make money. And if position takers do not make money, they will not compete so much for the market-making business.
So let's make liquidity a free good. Then you don't even have to regulate dealers. They'll just wither away...
In financial theory, it is common practice to assume perfect arbitrage, and hence also complete liquidity. Assets are assumed to trade at their fundamental value since any other price would create an arbitrage profit opportunity. In effect, the world that the finance theorists imagine is a world in which the VBT outside spread is very very narrow, so there is no room and no need for dealers. In the real world, the outside spread is quite wide, dealers offer prices inside that spread but the prices can deviate very far from fundamental value. That is the world Fischer Black was talking about in his infamous presidential address to the American Finance Association when he said that he thought markets were efficient, meaning price was usually within a factor of two of true value.
We can understand what Black is saying by referring back to the Treynor model. Suppose that fundamental value is the price that dealers would quote if their inventories were exactly zero, so they are not exposed to any price risk. The Treynor model then shows how market making by dealers pushes price away from fundamental value, on one side or another, by more or less depending on the size of the outside spread and the dealer’s maximum long and short position limits. Standard asset price theory abstracts from this effect, in effect treating the outside spread as collapsed around fundamental value, so there is no need for dealers. Some markets are close approximations to this, but others are not; some times are close approximations to this, but others are not.
If efficiency is completely arbitrary, then the prices that high-frequency traders even out, which the post I was responding to hailed as the legitimate foundation of capitalism, are based on what? They're just pushing prices around to make a profit. Why is that "legitimate"?
Dealers profit from the general lack of liquidity. Wouldn't it be better if a "public option" existed, which provided liquidity without a profit motive? You wouldn't have to regulate dealers; just provide another option which worked in the public interest, pushing prices lower than dealers alone will.
On Monday, December 30, 1985, Fischer gave the presidential address to the American Finance Association which was meeting in New York, and stunned his audience with the following words:
“We might define an efficient market as one in which price is within a factor of 2 of value; i.e. the price is more than half of value and less than twice value. By this definition, I think almost all markets are efficient almost all of the time. ‘Almost all’ means at least 90 percent.”
Here we can detect, I think, the influence of Fischer Black’s friend, Jack Treynor, who had originally introduced him to his own version of the capital asset pricing model but gone on to a life in the markets rather than academia, and in that life had produced the dealer model that we have been using in previous lectures. Think about what the dealer model says. It says, just as Fischer relates, that the price of a security fluctuates within bounds set by the value based trader, bounds that can be rather far from true value. At any moment in time, the price of the security will lie somewhere within those bounds, exactly where depends on the inventory of the dealer.
Dealers profit by exploiting market inefficiencies, and pushing prices away from their efficient levels, within a factor of 2. So if the efficient level of a barrel of oil is $100, the dealers can push the price down to $50 or up to $200. That's a pretty wide margin of error.
"No shirt, no shoes, no service" denies you service. "No Google Glass, either" denies you the right to use Google Glass, like "No Mastercard" or "No checks" denies you the right to use certain forms of payment.
You're missing the most obvious interpretation of the title: "No" is repeated for linguistic, and phonetic effect. It has different meanings in the different contexts. In the first phrase, "No shirt, No shoes, No service", the first two "No"s can be interpreted as being in an ellided "if" clause: "If you have no shirt or no shoes, then you will get no service." The third "No" is in a consequent clause, and means that you will receive no service.
In "No Google Glass, Either", the "No" can be interpreted as a standard proscription against what follows. It is like "No running", "No swimming", "No smoking", etc.
To recap: "No shirt, no shoes, no service" is a common phrase which uses the word "no". "No Google Glass, either" is referencing another common syntactical pattern using the word "no". The title was constructed, I think, with the idea of mentioning a lot of "no"s, which are used in different contexts. The point is that businesses like to tell you "no" a lot.
The obvious solution: give people money to enjoy leisure time. Productivity increases, automation for example, mean that less human labor is needed to produce the goods that society demands. So fewer people need to work. Create a basic income, so that everyone has the choice of working on what they want to do, instead of what a boss tells them to do. Stimulate innovation by holding challenges.
The point is that we can create more money without causing hyperinflation, because it won't be a case of more money chasing the same goods. There is plenty of production capacity available to produce more goods.
We can of course encourage people not to consume mindlessly, but use the created money to raise the minimum standard of living. There are a lot of homeless people out there, and people who can't get dental care so their teeth are rotting out of their mouths. Give them created money so they can have a decent life.
Banks do it all the time. When they create a mortgage-backed asset, are they creating wealth? They're taking a pool of mortgages, and inflating them to many times their value. Then they create a risk-free asset by hedging it with swaps. The problem was the big banks (like UBS) got greedy and didn't hedge enough. But they booked all the expected profits upfront, and paid bonuses on them immediately.
Better to create money and use it to empower individuals, not corporations. Stimulate individuals to create and innovate, holding challenges (Google bug bounties, Netflix Prize, X-Prize, challenge.gov, kaggle.com, etc.). As long as we keep advancing knowledge, we can create as much money as we feel like.
So if you sell that asset, you won't get real money for it?
I don't buy tomatoes. But bananas haven't gone up. There was a large supply of blueberries a couple months ago and the prices were way down. The plural of your shopping anecdote is not data.
Why does the created money chase the same goods, when there isn't a production capacity problem?
The Fed returns interest to the Treasury. So the govt borrows at zero cost.
The focus should be on innovation and the advance of knowledge, because that is what is likely to raise survival fitness the most by enabling us to predict and adapt to sudden catastrophic change. As long as we keep innovating, we can create as much money as we want.
In these times of unprecedented communication possibilities made possible by the internet, individuals on a Basic Income (funded with created money) can innovate on their own or in ad hoc collaborations (example). Individuals are better at disruptive innovation, biz is better at incremental innovation. (See http://depts.washington.edu/uwsis/overview/overview.html#background.) So empower individuals (with created money) to innovate disruptively, holding challenges to stimulate their native curiosity and instinct for wonder; then turn the best ideas over to biz so they can bring them to everyone.
Righties have been making the same prediction since the very first administration when Alexander Hamilton assumed the states' war debts, and started the United States Bank. And yet grandkids have always had a higher standard of living than their grandparents. Maybe it's time to challenge your faith in your feudal economic theories?
There's no production capacity problem. There's a demand problem. There's no scarcity of labor. Obviously, the solution is to create money and use it to empower individuals, instead of corporations.
Slashdot Mirror
Dealers profit from market inefficiency, inserting themselves as middlemen and profiting by pushing prices away from their efficient levels. Why not just let ultimate lenders and borrowers meet with technology, obsoleting the "market makers" raising prices because of their profit-seeking motives?
Seattle Innovation Symposium
Consider this quotation from the Seattle Innovation Symposium:
Individuals tinkering with things produce innovation. Capitalism is slow to uptake most of the good ideas. AT&T resisted the idea of the internet, because it didn't fit in with their business model of telephones.
Why assume that the only way this could happen is through capitalism? How many individuals thought of doing this, but didn't, because they were under too much stress working for a little Napoleon boss telling them to do something else so he could secure another country club membership? How much does capitalism retard innovation?
To me it's more like: a sign in a store window says "No shirt, no shoes, no service." Another sign below it says "No smoking." The "either" was added to reinforce the "no" part of the two messages. The "no"s convey slightly different meanings, but they're in different contexts. This is something that context-sensitive natural language does all the time.
Your problem may be that you're too used to context-free, formal languages. But the way people communicate everyday is much more expressive.
3D printers can print themselves...and then you eliminate transportation costs.
Why should liquidity be kept artficially scarce?
It's honestly taking advantage of market inefficiencies to profit without contributing any value. It was legal for Magnetar to sell RMBS that they had long CDS positions on, without telling the buyer that.
Quoting from Lecture 10 Notes:
So let's make liquidity a free good. Then you don't even have to regulate dealers. They'll just wither away...
Quoting from Mehring's Notes for Lecture 10, in Economics of Money and Banking, Part One:
If efficiency is completely arbitrary, then the prices that high-frequency traders even out, which the post I was responding to hailed as the legitimate foundation of capitalism, are based on what? They're just pushing prices around to make a profit. Why is that "legitimate"?
Dealers profit from the general lack of liquidity. Wouldn't it be better if a "public option" existed, which provided liquidity without a profit motive? You wouldn't have to regulate dealers; just provide another option which worked in the public interest, pushing prices lower than dealers alone will.
What does China do again? Provide cheap labor? 3D printing will eliminate that advantage.
Market-making dealers push prices away from their efficient levels, as even Fischer Black noted. From Perry Mehrling's Lecture 22 Notes, in his Economics of Money and Banking, Part Two MOOC:
Dealers profit by exploiting market inefficiencies, and pushing prices away from their efficient levels, within a factor of 2. So if the efficient level of a barrel of oil is $100, the dealers can push the price down to $50 or up to $200. That's a pretty wide margin of error.
It was the first and only way I interpreted it.
"No shirt, no shoes, no service" denies you service. "No Google Glass, either" denies you the right to use Google Glass, like "No Mastercard" or "No checks" denies you the right to use certain forms of payment.
You're missing the most obvious interpretation of the title: "No" is repeated for linguistic, and phonetic effect. It has different meanings in the different contexts. In the first phrase, "No shirt, No shoes, No service", the first two "No"s can be interpreted as being in an ellided "if" clause: "If you have no shirt or no shoes, then you will get no service." The third "No" is in a consequent clause, and means that you will receive no service.
In "No Google Glass, Either", the "No" can be interpreted as a standard proscription against what follows. It is like "No running", "No swimming", "No smoking", etc.
To recap: "No shirt, no shoes, no service" is a common phrase which uses the word "no". "No Google Glass, either" is referencing another common syntactical pattern using the word "no". The title was constructed, I think, with the idea of mentioning a lot of "no"s, which are used in different contexts. The point is that businesses like to tell you "no" a lot.
The obvious solution: give people money to enjoy leisure time. Productivity increases, automation for example, mean that less human labor is needed to produce the goods that society demands. So fewer people need to work. Create a basic income, so that everyone has the choice of working on what they want to do, instead of what a boss tells them to do. Stimulate innovation by holding challenges.
Compare that to the shadow banking system's $100 trillion, created out of thin air. Were mortgage-backed assets really "wealth creation"?
The point is that we can create more money without causing hyperinflation, because it won't be a case of more money chasing the same goods. There is plenty of production capacity available to produce more goods.
We can of course encourage people not to consume mindlessly, but use the created money to raise the minimum standard of living. There are a lot of homeless people out there, and people who can't get dental care so their teeth are rotting out of their mouths. Give them created money so they can have a decent life.
Banks do it all the time. When they create a mortgage-backed asset, are they creating wealth? They're taking a pool of mortgages, and inflating them to many times their value. Then they create a risk-free asset by hedging it with swaps. The problem was the big banks (like UBS) got greedy and didn't hedge enough. But they booked all the expected profits upfront, and paid bonuses on them immediately.
Better to create money and use it to empower individuals, not corporations. Stimulate individuals to create and innovate, holding challenges (Google bug bounties, Netflix Prize, X-Prize, challenge.gov, kaggle.com, etc.). As long as we keep advancing knowledge, we can create as much money as we feel like.
So if you sell that asset, you won't get real money for it?
I don't buy tomatoes. But bananas haven't gone up. There was a large supply of blueberries a couple months ago and the prices were way down. The plural of your shopping anecdote is not data.
Why does the created money chase the same goods, when there isn't a production capacity problem?
The Fed returns interest to the Treasury. So the govt borrows at zero cost.
The focus should be on innovation and the advance of knowledge, because that is what is likely to raise survival fitness the most by enabling us to predict and adapt to sudden catastrophic change. As long as we keep innovating, we can create as much money as we want.
In these times of unprecedented communication possibilities made possible by the internet, individuals on a Basic Income (funded with created money) can innovate on their own or in ad hoc collaborations (example). Individuals are better at disruptive innovation, biz is better at incremental innovation. (See http://depts.washington.edu/uwsis/overview/overview.html#background .) So empower individuals (with created money) to innovate disruptively, holding challenges to stimulate their native curiosity and instinct for wonder; then turn the best ideas over to biz so they can bring them to everyone.
Righties have been making the same prediction since the very first administration when Alexander Hamilton assumed the states' war debts, and started the United States Bank. And yet grandkids have always had a higher standard of living than their grandparents. Maybe it's time to challenge your faith in your feudal economic theories?
What are you talking about? It still says "$900 writedown".
There's no production capacity problem. There's a demand problem. There's no scarcity of labor. Obviously, the solution is to create money and use it to empower individuals, instead of corporations.
But did they have smartphones?
Right, you could sell your house for an inflated amount back then!! oh wait...