Risk Management and Ascent of Money
In his book, Ascent of Money, NF writes about the need for new exotic financial instruments to manage risks in financial markets. He justifies many past money innovations as means to manage risk. There is a fundamental problem with a money system that needs "risk management" instruments and institutions. The problem is the divorcing of the substance of problem-solving time (work) from the symbols of problem-solving time. The greater the divorce, the greater the risk that the symbols will not be worth the substance, e.g., inflation, 401ks and insurance. Furthermore, the innovation of more exotic "risk" tools only exacerbates the divorce of symbols from substance. In other words, exotic tools are inevitably cancers to the financial system, fostering booms as people pursue new symbols of wealth only to find the symbols worthless after the bust.
Essence of derivatives is finding a spread between two or more financial instruments in different financial markets. The spread is a result of the symbols not being tied or married to the substance of wealth creation, that is, solving real problems of need (not pseudo problems of want--see cost of humanity). Given the number of locations trading funny paper with funny numbers, a computer connected via the internet to all of these location can instantaneously buy and sell so as to collect the difference. It is like simultaneously selling both short and long without the need of options. There is not risk, just legal theft.
In praising the new exotic funny papers with funny numbers, NF also praises the financial paper-pushers who organize together to speculate in the alphabet solution of financial instruments that no one seems to understand: the hedge funds. In defending the constant demise of hedge funds, NF calls it evolution, survival of the fittest. Is this what he would call your common bank robber who does not get caught? It is not funny when financial paper pushers rob banks, savings and pensions with computers stripping wealth in bits and bytes. Hedge funds don't evolve, they go bankrupt when they fail to legally rob a bank.
Worse for society than drug pushers are the funny paper pushers: How many people have had their 401ks disappear due to a drug transaction? Due to a funny paper transaction? Which is worse for the working middle class of all countries? Welfare or wealthfare?
Habitual politicians and tenured economists think that wealth is created when someone overcharges for their existence. No. It is not wealth creation. It is wealth transfer. It is wealthfare. It is financial cancers. It is not capitalism but is decapitalism. Long Term Capital Management (LTCM) typifies this legal thievery where two Nobel Laureates in economics set up a company to take money by monitoring the spread.
The proposed timistic currency--lifehours--is one that is least divorced from the substance of creating solutions to life's real problems. With the lifehour, there will be less and less risk of inflation and bubbles. With lifehours fostering productive deflation, the value of a lifehour symbol will be worth more in the substance of each hour of life. Pensions stored in lifehours will be worth more and more buying power as opposed to the reality of 401ks becoming 201ks or less.
The whole financial and economic system based on monetarism with formulas for risk, credits, games, etc, is not viable. Rather, it is necrotic, a system of dying laws: Necronomics. Either we bury monetarism or it will bury us.
Will NF and his irk who think they are turning water into wine support economic and currency reform? No, no more than John Maynard Keynes or Alan Greenspan who were stock speculators, not investors.
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