Skip to main content

Proposed Ending for Book

We have travelled a long way. A look back is a good way to end a journey.

We began with a discussion of some of the concepts essential to any discussion of contemporary finance. Why do stock prices move? Do they move randomly? We discussed the fact that modern finance theory has long used the bell curve as a randomness base line.

Related to this, we said that the efficiency of markets, built as it is upon their liquidity and transparency, as well as the fact that a lot of very smart people are looking for an edge in competition with one another, is an adequate explanation for random movements, but that inefficiencies of inefficiencies of markets, which show up as skewed or otherwise non-normal curves, require other explanations.

From there we moved to the questions: how stock options derive their value? And, what are the defining facts about bonds, either corporate or sovereign? We also discussed accounting, and so the balance-sheet difference between stocks (as equity) and bonds (as debt).

In the second section, we turned to the recent history of finance capitalism,  both the ways in which academia understands it and the way in which it is in fact practiced. In the matter of practice, we discussed the Clinton era crises over Mexico and East Asia, and we worked our way forward through the internet revolution, the dotcom bust, the Bush II era housing bubble and its bust, the fall of Bernard Madoff, and the rise of high-frequency trading in the markets, along with the disappearance of those colorfully jacketed old-fashioned floor traders.  

Since then, the rolling crises have been those of the European sovereigns, as the continent tries awkwardly to come together as a single financial entity while several of its participant states seem poised to come apart.

A rescue package for Greece, announced by the European Financial Stability Facility in July 2011, is symptomatic of the broader rolling crisis. Though the announcement looked a lot like a dressed-up default, investors reacted with relief. Bad though it was, it still seemed to them a stumble forward rather than back.

In this third section, we have tried to extrapolate near-term future trends based upon three legacies: the nation-state form, the growth of militant Islam, the increasing significance of the blend of secularism and Islam in the nation-state of Turkey, and now the availability of alternative 9non-nation-state based) currencies. I believe an attentive reader has received a fine return on his investment in terms of the grasp of the existing and unfolding world, and I could without further ado rest my labors.   

Except that I wish to express my own sense of optimism about our species. Here it is: I see the world of finance as part – an important part, though not the important part – of the continuing effort of the species to reconcile with one another, to allow one another to pursue a variety of disparate life goals without conflict. In the end this will mean, this must mean, that we or our descendants (not too far distant) will find ways of interacting that do not depend upon sovereignty, hierarchy, and command.  

This is why the cryptocurrencies are so important. Each is a peer-to-peer network, where there is no central bank, nor any central computer, nor even any central cloud. There is no central anything, no chain of command, no highest link. There are peers.

I look forward to the day when humanity itself shall be one really big peer-to-peer network.


Popular posts from this blog

A Story About Coleridge

This is a quote from a memoir by Dorothy Wordsworth, reflecting on a trip she took with two famous poets, her brother, William Wordsworth, and their similarly gifted companion, Samuel Taylor Coleridge.

We sat upon a bench, placed for the sake of one of these views, whence we looked down upon the waterfall, and over the open country ... A lady and gentleman, more expeditious tourists than ourselves, came to the spot; they left us at the seat, and we found them again at another station above the Falls. Coleridge, who is always good-natured enough to enter into conversation with anybody whom he meets in his way, began to talk with the gentleman, who observed that it was a majestic waterfall. Coleridge was delighted with the accuracy of the epithet, particularly as he had been settling in his own mind the precise meaning of the words grand, majestic, sublime, etc., and had discussed the subject with William at some length the day before. “Yes, sir,” says Coleridge, “it is a majestic wate…

Cancer Breakthrough

Hopeful news in recent days about an old and dear desideratum: a cure for cancer. Or at least for a cancer, and a nasty one at that.

The news comes about because investors in GlaxoSmithKline are greedy for profits, and has already inspired a bit of deregulation to boot. 

The FDA has paved the road for a speedy review of a new BCMA drug for multiple myeloma, essentially cancer of the bone marrow. This means that the US govt has removed some of the hurdles that would otherwise (by decision of the same govt) face a company trying to proceed with these trials expeditiously. 

This has been done because the Phase I clinical trial results have been very promising. The report I've seen indicates that details of these results will be shared with the world on Dec. 11 at the annual meeting of the American Society of Hematology. 

The European Medicines Agency has also given priority treatment to the drug in question. 

GSK's website identifies the drug at issue as "GSK2857916," althou…

Hume's Cutlery

David Hume is renowned for two pieces of cutlery, the guillotine and the fork.

Hume's guillotine is the sharp cut he makes between "is" statements and "ought" statements, to make the point that the former never ground the latter.

His "fork" is the division between what later came to be called "analytic" and "synthetic" statements, with the ominous observation that any books containing statements that cannot be assigned to one or the other prong should be burnt.

Actually, I should acknowledge that there is some dispute as to how well or poorly the dichotomy Hume outlines really maps onto the analytic/synthetic dichotomy. Some writers maintain that Hume meant something quite different and has been hijacked. Personally, I've never seen the alleged difference however hard they've worked to point it out to me.

The guillotine makes for a more dramatic graphic than a mere fork, hence the bit of clip art above.

I'm curious whe…