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Why is finance so complex? (2011)

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Re: Why is finance so complex? (2011)

#121

Post by jaawn »

h8trswana8 wrote: post #14

The world of finance makes these aspects of your life function: * Allows you to get a mortgage * Allows you to protect yourself with health/car/life/home/title/etc insurance * Pays for your highways/stadiums/schools and other public works * Protects your deposits * Pays for your retirement * Funds the college fund that paid for your school * ... Or the student loans that allowed you to attend school * Supports the gl…

> Financial innovation...

This vague phrase is very misleading. It is certainly not true that all "Financial Innovation" makes our lives more predictable and less sensitive to chance. Please see 2008 for reference.

Sure, there are some benefits to basic finance and lending, but "basic finance and lending" are not really "Financial Innovation" at this point either. I think we would all benefit if you defined your terms better.

Re: Why is finance so complex? (2011)

#122

Post by rorykoehler »

h8trswana8 wrote: post #14

The world of finance makes these aspects of your life function: * Allows you to get a mortgage * Allows you to protect yourself with health/car/life/home/title/etc insurance * Pays for your highways/stadiums/schools and other public works * Protects your deposits * Pays for your retirement * Funds the college fund that paid for your school * ... Or the student loans that allowed you to attend school * Supports the gl…

Currently the financial system generates profit while destroying value. It's out of control and only serves the interest of those who already have considerable amounts of capital.

Re: Why is finance so complex? (2011)

#124

Post by rorykoehler »

coderzach wrote: post #51
alextgordon wrote: post #44

Earlier quoted context omitted.

If we live in a democracy, and money is backed by the state, why do we have to pay interest to profit-making banks and insurance companies? Giving out mortgages is not difficult. You just have to be a bank. Not only that but 2007 showed that profit-making banks are even worse than a reasonable person, or precocious five year old, would be at deciding who should be given a mortgage. Mortgages are a necessary part of s…

So you want to collect enough taxes to have the government provide zero interest mortgages. Does that mean everyone gets a mortgage, regardless of creditworthiness? You want me to pay for other people's mortgages, when they won't even give me one?

That's essentially how buy to let works. As a renter I am paying for someone else's mortgage. If I could get a zero interest (or even normal interest) mortgage guaranteed by the government I wouldn't have to rent and I could retain that value that I have generated for myself. As it stands I work my ass off and make someone else rich in exchange for keeping my chin just above the water line. Housing is a necessity and its profitization is unethical. It amplifies wealth disparities and destroys value in society.

Re: Why is finance so complex? (2011)

#125

Post by TheCoelacanth »

ArkyBeagle wrote: post #43
branchless wrote: post #29

Earlier quoted context omitted.

I agree. Land value tax. It would cut the banks down to size in no time as it would cut down land speculation which makes up the bulk of bank lending.

I'd simply be interested in seeing more of working people's spending money available to increase the economy. I am not sure that this must be at the expense of banks. One natural experiment in the effects of speculation is home prices in Texas ( which taxes land rents more than most states ) vs. Florida ( which taxes them less ). It would also help address some examples of misallocation of land. Since the tax base is…

Well, it's a very small sample, but Florida was one of the hardest hit by the housing bubble a few years ago, while Texas had relatively stable housing prices. California also was heavily impacted by the housing bubble and it has Prop 13.

Re: Why is finance so complex? (2011)

#126

Post by random_6hm9v »

nisa wrote: post #22
h8trswana8 wrote: post #14

The world of finance makes these aspects of your life function: * Allows you to get a mortgage * Allows you to protect yourself with health/car/life/home/title/etc insurance * Pays for your highways/stadiums/schools and other public works * Protects your deposits * Pays for your retirement * Funds the college fund that paid for your school * ... Or the student loans that allowed you to attend school * Supports the gl…

*If you life in a first world country and come from at least a lower-middle class background You are talking about money. Not modern wall-street finance. > huge amount of human progress is owed to modern-day financial institutions. Like synthetic credit default swaps? > Like a software system, it's extremely naive to think that complexity is a sign that a system is rotten. Complexity that can't be coped with is rotte…

I bet you don't own an iPhone (because the explanations were solely for that specific category of people)!

Re: Why is finance so complex? (2011)

#127

Post by bakhy »

This reminded me of the concept of demurrage in currency [1]. The idea was brought up to solve that exact problem. The messy system of inflationary fiat currencies won, and even though it is probably better and more practical, the demurrage would have had the advantage of making it clear what we're trying to achieve. Inflation seems to be hated by many people which, judging from their other political viewpoints, should be supportive of it...

[1] https://en.wikipedia.org/wiki/Demurrage_%28currency%29

Re: Why is finance so complex? (2011)

#128

Post by vonmoltke »

innguest wrote: post #62
coderzach wrote: post #52

Earlier quoted context omitted.

Not really. Land, Materials, and a team of carpenters/electricians/roofers/hvac/painters for 3-6 months ends up at around 400k. It's not really that crazy. If you paid them all programmer salaries, you'd never get a house for under 1mm.

A monolithic concrete dome that is energy-efficient, fire-proof, tornado-proof and earthquake-proof costs around $30k. But it's not your money so you don't care that the banks are subsidizing incredibly complex, unreliable, weak, stucco-wall houses that due to their unnecessary complexity, naturally end up costing several times more than a better, simpler house.

> A monolithic concrete dome that is energy-efficient, fire-proof, tornado-proof and earthquake-proof costs around $30k.

For a space smaller than a typical studio apartment. The Monolithic Dome Institute[1] quotes domes at $125/sf (including walls) for a "regular" finish. Your $30,000 dome would have a footprint of 250 sf. My house would cost at least $287,500 to replace with a dome; in contrast, it would cost about $150,000 to replace it with another wood-framed house. Concrete block costs would depend heavily on how complex the floor plan is, but would still be cheaper than a monolithic dome.

[1] http://www.monolithic.org/forms/the-residential-evaluator

Re: Why is finance so complex? (2011)

#129

Post by TheGrimDerp1 »

forrestthewoods wrote: post #79
pimlottc wrote: post #68

Earlier quoted context omitted.

Isn't that an example of complexity that is being successfully coped with, thanks to the abstractions provided by the various industries and institutions that provide raw materials, processing, shipping, etc?

I guess I'm not clear as to what "can't be coped with" means precisely.

I've been reading it as "Grokked," as in 'understood.' Cause it aint "coped," as in "they could handle it." Copped would be more like they got some of something on the sly, possibly through sleight of hand ( copped a feel. ) In this case, accidental understanding of a system?

Re: Why is finance so complex? (2011)

#130

Post by rlonstein »

sdenton4 wrote: post #82
dragonwriter wrote: post #66

Earlier quoted context omitted.

> Now tell me how I'm wrong because "furniture doesn't fit in curved walls" Well, yeah, if you are going to have a house that small -- 500 sq. ft. -- optimal shape is a pretty big concern. > and how that justifies the $370k discretionary increase Well, much of the increase is going to be land price. Even a 500 sq. ft. dome home anywhere more typical home prices for reasonably moderately sized homes are around $400,00…

Eh, I lived in a 400sq foot dome for four years. Always with a room-mate, sometimes with two. It was great. The bit of space between the couch and the wall just becomes some oddly-shaped storage space. Sometimes people would carve their own dome-fitting bookshelves in the wood shop. There were fourteen of these domes, run as a cooperative, on three acres of land. The loans on building them were paid off in full by th…

   > Cooperative ownership is fantastic, and a great cure 
   > for the ails of capitalism.
+$0.02. I served several years on a housing co-op board for a 156 unit urban high-rise (including as treasurer) and cooperative ownership is itself not a cure all, only the composition of the "ownership" is different. The shareholders (tenants) pool their investment, true, and then go on to create a corporate structure, elect a board, draw up rules and enforce them, assign duties, levy fees and payments, hire staff, contract, etc. It's a fairly ordinary corporation in most respects. The co-op is the landlord and it's quite a business to run even when things are going well and everyone pulls in the same direction and individuals don't cause each other trouble. When things go wrong (as they always do) or shareholders disagree (as they always do) or people behave badly (as they always do), it's exceedingly challenging and because it's a mix of personal and business there are some tough decisions and terrible hard feelings.

I agree capital tends to avoid housing co-ops because they smell funny and act differently and the laws around them are a mess. As a result, it's harder to assess the risk for a co-op than other businesses and more complicated to borrow, contract, etc.

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