As I said in another thread, their is a history of them wanting the freedom to screw over the rest of us.
Well as in the Financial Markets thread I made, I heavily argued against financial innovation because the entire derivatives market is nothing but a hogwash of stealing everyone's money while producing zero products of value.
I mean look at the things they did, you have the securities market that was trading Credit Default Swaps on the Collateral Debt Obligations, so essentially you were doing naked insurance. That does not make sense. What is worse is that, the topics are so hard to understand and confusing to look at that people get caught up in their lies and figure it's actually good for them.
- A) You have people taking risk on money that isn't theirs, it's your money. It's your pension, it's your retirement savings, it's your bank accounts and they're just fooling around with your money that you think is yours and safe.
- B) They produce nothing. What does a CDS get me? Nothing. Even if I build a crappy car, someone can buy a cheap crappy car. Someone buys a CDS, some manager or exec at Goldman Sachs get rich, you get ass nothing.
- C) I'm not a guy for 100% full reserve banking and I understand that we have some grease on the economic wheels at the cost of having a class of people who produce nothing of value and just move money around but we should view it more as a service cost and less of an industry on its own.
- D) Zero-sum game for derivative markets my ass. They win, I lose. So yeah it's zero-sum, all the middle class and poor lose and all the rich win.
- E) Financial innovation typically means: leverage more in more confusing ways. Introducing more risk and more volatility to the markets doesn't help at all.
edited 9th Jun '11 12:01:17 AM by breadloaf
To me 'Financial Innovation' sounds like an expensive euphemism for fraud.
Yes but that applies to virtually ANYTHING.
"we were Financially innovative with your stocks" does sound like a very creepy euphamism though.
Den harde nordmann
If a Financial Innovation is when you reduce the delay between exchange of money, it can be a improvment.
But lets say that money does not move outside of the banking sector.... Then that exchange has become irrelevant, and it is no different from arbitary money hoarding.
Moar and Moar and Moar
If a company can't explain in a sentence...what it does...it should be illegal.
That's a bit simplistic, of course, but the general idea is correct. Most financial innovation is basically pushing paper around to create the illusion (and often the illusion is enough) of additional wealth. Now, actual innovation..say something that resulted in lower interest rates for consumers or better service or what have you, would be welcome in my book.
Not something you're likely to see however.
Democracy is the process in which we determine the government that we deserve
I'm generally against financial innovation. I don't think it does us anything good. It only gives people chance to meddle with market processes. See: interest rate regulation
edited 9th Jun '11 3:24:52 AM by nzm1536
"Take your (...) hippy dream world, I'll take reality and earning my happiness with my own efforts" - Barkey
@nzm
Actually, now I'm curious, what do you mean by interest rate regulation when it comes to financial innovation?
Pro-Freedom Fanatic
I'm not a fan, either. Doing fishy and sketchy things with other people's money that end up in them losing their money and you getting rich has eerie similarities to embezzlement.
You exist because we allow it and you will end because we demand it.
First off, I would like to say that I do not know much about financial innovation, which is why I'm making this topic.
Financial innovation, as described by Wikipedia, is the creation and marketing of new securities.
Ripped directly from Wikipedia, examples of Innovation:
Examples of mathematical innovation
Futures, options, and many other types of derivatives have been around for centuries: the Japanese rice futures market started trading around 1730. However, recent decades have seen an explosion use of derivatives and mathematically-complicated securitization techniques. Mac Kenzie (2006) argues from a sociological point of view that mathematical formulas actually change the way that economic agents use and price assets. Economists, rather than acting as a camera taking an objective picture of the way the world works, actively change behavior by providing formulas that let dispersed agents agree on prices for new assets.
Examples of innovation to avoid taxes and regulation
Miller (1986) places great emphasis on the role of taxes and government regulation in stimulating financial innovation. Modigliani and Miller (1958) explicitly considered taxes as a reason to prefer one type of security over another, despite that corporations and investors should be indifferent to capital structure in a fractionless world.
The development of checking accounts at U.S. banks was in order to avoid punitive taxes on state bank notes that were part of the National Banking Act.
Some investors use total return swaps to convert dividends into capital gains, which are taxed at a lower rate.[1]
Many times, regulators have explicitly discouraged or outlawed trading in certain types of financial securities. In the United States, gambling is mostly illegal, and it can be difficult to tell whether financial contracts are illegal gambling instruments or legitimate tools for investment and risk-sharing. The Commodity Futures Trading Commission is in charge of making this determination. The difficulty that the Chicago Board of Trade faced in attempting to trade futures on stocks and stock indexes is described in Melamed (1996).
In the United States, Regulation Q drove several types of financial innovation to get around its interest rate ceilings, including eurodollars and NOW accounts.
Banks argue against banking regulations because they stifle financial innovation. Some economists argue that financial innovation does not produce anything of value, so further regulations are needed.
So yeah, is this innovation needed or should it be removed?
I should also point out that I understand how some views on libertarianism will come into play, so I will allow some latitude should the topic come to that.
edited 8th Jun '11 11:21:39 PM by Enkufka
Very big Daydream Believer. "That's not knowledge, that's a crapshoot!" -Al Murray "Welcome to QI" -Stephen Fry