XKCD: It's more than a comic

Yeah, that's the best I can come up with.

Technical Analysis. Whoa, this one's a bit of a doozy.

That was pretty... random.

Edited by petersohn on Jan 21st 2019 at 9:51:02 PM

Read the alt text. I think this is nothing less than a political statement on the nature of modern economics in disguise.

Having worked in the investment advisory sector, this one made me snort. The alt text is sadly accurate.

Mmm hmm. Paul Krugman harps on this a lot: how all the technical and highly mathematical models in the world won't do squat for you if they are based on fundamentally incorrect assumptions.

The point of the graph and the point of the alt-text do not seem to mesh exactly. The first appears to be a dig at the validity of modern economic forecasting (of the stock market specifically?). The second (a quote from James Tobin) seems like its lamenting the very high proportion of national wealth and activity that goes into financial speculation, as opposed to producing goods or services of value.

The second point seems more important to me than the first, frankly.

It's specifically talking about all the resources going into sophisticated financial models and analysis tools that divert resources from the "real" economy into producing microscopically faster trading.

Edited by Fighteer on Jan 24th 2019 at 2:29:30 PM

It kinda feels like Randall just wanted to give us that quote, and then made a comic around it.

There seems to be an underlying perception that high speed trading has attracted more labor and money into financial trading than is good for society.

Financial trading absorbs some of the best and brightest in mathematics and economics, all directed at the goal of enabling the richest investors to make money slightly faster than their competitors. It's a tragic sinkhole of talent.

There's an eerie, but apt comparison to be found in the recent surge in high-end GPU purchases for the sole purpose of cryptocurrency mining: a waste of perfectly good hardware that also drives up its prices, freezing out people who want to use it to, you know, play games.

Edited by Fighteer on Jan 21st 2019 at 10:26:48 AM

Cryptomining also using a huge amount of generated energy (much likely from fossil fuels) and generating heat, quite possibly helping to melt the icecaps. For virtual money.

Well, cryptocurrency doesnt drive the economy at large the way financial speculation does.

The people who are obsessed with it certainly seem to think it ought to, but that's neither here nor there. No analogy is perfect.

Last I checked, cryptocurrency had fallen to the point that people have learned their lessons and are ignoring it again. Though I admit I don't pay much attention to commodities trading.

What causes this whole financial sandtrap, exactly? Is it another thing that can be blamed on the stock market and being able to make a million trades per second, or is it something else?

"people have learned their lessons"

Ha. Ha ha. Ha ha ha ha ha ha! No, they'll never blame their own gullibility or ignorance; they'll just move on to a new get rich quick scheme.

On your other question, the essence of the stock market is beating trends. The faster you trade and the more accurately you predict the market, the better your results will be. So that means "better" computer models and faster algorithms to generate trades. The reward to the leaders in this race is disproportionately high and has almost nothing to do with the performance of the markets as a whole.

A financial transaction tax would help here.

Edited by Fighteer on Jan 22nd 2019 at 10:49:17 AM

I meant learned their lesson on cryptocurrency specifically. Obviously they're still going to fall in the exact same trap repainted with a different commodity, but at least if cryptocurrency gets kicked to the roadside we won't have an artificially inflated price of GPUs.

And again, that's an honest question, because I've been doing my best to ignore it. I just heard that bubble finally popped.

Edited by Discar on Jan 22nd 2019 at 7:59:56 AM

We'll still see a base of crypto diehards who won't renounce their religion even on their deathbeds, and a secondary group of fair-weather fans who come and go depending on whether they see an opportunity for short-term gain, but maintain a vocal belief in the ideology underlying the concept regardless.

And there will still be the dark side of crypto in the form of people using it for illegal commerce regardless of its face value. Ironically, this criminal use may provide the baseline level of demand needed to sustain its viability.

Edited by Fighteer on Jan 22nd 2019 at 11:40:22 AM

I understood the actual comic as Randall's usual "hilarious misuse of terms that aren't related to the thing being described" coupled with a bit of mocking how people tend to view and interpret visualized data. The alt-text is extremely relevant in this day and age where people spend millions in order to make slightly more millions, all while absolutely nothing of value is made while much of value is lost.

And to hell with crypto-miners.

It's not really my area, but I respect the ideas behind cryptocurrencies, at least.

I like the idea of providing a method of monetary transfer that governments cannot obstruct, and which are less dependent on any one's government's stability for its worth. More grey to me is that its lack of organizational insight means it can be used more readily for crimes (although ultimately, my understanding is that it still is traceable if you're in the line of payment, so it's more a matter of avoiding notice). What really gets my goat is that it's explicitly built on no backing. I mean, that's how currencies generally work these days, with the money being backed by the government's promise, and that's about it, but this is something where people can spend resources just to create money out of thin air, which, as I stated before, generally come from ecologically harmful means, and for what?

At least sovereign currencies are at least theoretically backed by a country's GDP. Cryptocurrencies have no inherent value in and of themselves, are not tied to any sort of backing, and in the meantime eat up GPU and energy for no return. And I'm really not for regulation-free anything. That just leads to all sorts of bad places.

Yep, exactly. The reason modern currencies can exist without being backed by gold or silver or whatever is because they are actually backed by government fiat. That's a good thing, because on the gold standard the only way to make more money is to invade a nearby country for their gold.

But cryptocurrency doesn't have that fiat, which means it's just a digital commodity dressed up like a currency. That's it. Buying stock in a bridge to Tarebithia would make about as much sense.

Only got one word to say when it comes to cryptocurrencies.

Tulips.

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