Earlier quoted context omitted.
What relevance has that comment?
Even engineers got a bailout : GM apparently presented a systemic risk to the US car industry.
You are trolling, right?
Friends don't let friends get into finance
121–130 of 147 posts
Re: Friends don't let friends get into finance
#122Perhaps it's not a problem with finance but a problem with other industries that don't pay their people well. Who is to say that a CDO isn't a valuable economic activity? If creating a CDO creates more value to the economy than designing an automobile why shouldn't engineers focus on building those? People forget that prices and money are essentially information about the supply and demand of a good. As we progress i…
It all comes down to allocation of capital, though. It's all economic overhead. How much are we spending to efficiently allocate capital? About nine percent of the whole economy, apparently.
That's assuming that all that work does end up effectively and appropriately distributing capital at the end of the day. If you read up on the recent financial bust, you'll quickly realize that all is not well in the world of finance. Many complicated instruments such as CDOs have sometimes not been designed to benefit the buyer. Papers have been written establishing that it is impossible to know if a CDO has been designed to fail. Check out propublica's reporting on magnetar for an example of how CDO trading flew off the rails.
I could go on. Suffice to say that there are regulatory issues (no regulation, basically) there are issues with defining, standardizing, and regulating these complicated derivatives, there are issues with high frequency trading, issues with predatory consumer financial services, and finally there is the giant issue of a clear moral hazard now that the government has saved everyone's tail.
Re: Friends don't let friends get into finance
#123paul kennedy. Britain. 1914.
Re: Friends don't let friends get into finance
#124I'm of the opinion this understates the problem. First, it is an ethical problem. The idea of producing things is not taught in elite colleges, nor is the idea that it is possible to make a positive contribution to society (e.g. rms) without becoming superrich (no offense to those for whom this is their primary motivation). Second, a lot of the products of which the GDP percentage is based upon simply involve repacka…
Repackaging debt is not an "accounting trick," it's creating liquidity. Which in turn allows more more "real" transactions to take place, more trade, more production, more manufacturing, more jobs, etc.
So far, so good.
Re: Friends don't let friends get into finance
#125Earlier quoted context omitted.
If you see finance as infrastructure to help other businesses grow (as I do), then it's growth should result in the growth of other industries. Instead what we see is finance growing and other industries declining. To me that suggests a general dysfunction in the role of finance. It simply isn't doing the good it's supposed to. There may be many or even most individuals who are acting in good faith, but the sector as…
If you see finance as infrastructure to help other businesses grow (as I do), then it's growth should result in the growth of other industries. Instead what we see is finance growing and other industries declining. To me that suggests a general dysfunction in the role of finance. It simply isn't doing the good it's supposed to. Well, I don't know that I find that very persuasive. Industries rise and fall all the time…
What would have happened if the US government did not bail out GM? Would other auto manufacturers fill the void? How many american workers would be out of jobs (both from GM and from their suppliers, and their supplier's suppliers, etc.)? We would still have Ford, either way and most imports.
Contrast this with the finance sector. What would happen if Goldman was not bailed out. What investment banking firm would still be standing and what would it look like?
Re: Friends don't let friends get into finance
#126Earlier quoted context omitted.
People generally won't use your site unless it helps them in some way. It makes their life easier, it helps them move information around, or they enjoy it. It's debatable whether the specifics represent a net good for humanity ( cough Zynga cough ) but there's at least a decent chance that you're helping folks out. Some financial organizations provide important liquidity. They offer you a loan when you need one. But…
"And it seems like the smarter the employees, the less likely they are to actually be providing any real services to people" I would call this a negotiation that they are winning. Just like startup founders win in their negotiation with employees for equity. "People generally won't use your site unless it helps them in some way." And people generally won't trade with you unless it helps them in some way. Again, how i…
So do you always view negotation as someone winning and someone losing?
Re: Friends don't let friends get into finance
#127Earlier quoted context omitted.
"The growth has been primarily in the financial industry." Completely false and absurd. Supply follows demand. GDP has grown throughout every industry that hasn't seen a decrease in its demand (e.g. railroads, newspapers, etc.). That includes technology, consumer goods, and technology. The economy doesn't exist in a vacuum. The finance industry provides capital to all industries.
If the financial industry hadn't been bailed out, it would have contacted. In its case, supply hasn't followed demand. Supply is artificially high, because demand has been produced by force.
How dare you criticize the interventionist market!
Re: Friends don't let friends get into finance
#128Earlier quoted context omitted.
I agree with you to some degree. There is a lot that happens well out of public (and sometimes regulatory) purview. I just think views that "finance is bad" or "startups are the best" are myopic, don't advance the discussion and ultimately fail to realize the inter-related'ness of all these different forces. Ultimately, we live in a pretty free agent society and if Wall St can pay more (no matter the reason), the rat…
This would be true if the losses from the last crash hadn't been socialized. If the financial industry had actually had to bear the consequences of the risks they take in the same way that entrepreneurs do, the decisions would be rational. As it is, the finance sector is protected by the government whereas startups are not.
Excellent point.
Re: Friends don't let friends get into finance
#129Earlier quoted context omitted.
When the collapse of Facebook presents systemic risk (or the illusion of system risk depending on your perspective) to the US, I'm sure it will get a "bail out" as well.
Seriously? You're saying that it's fine for the financial industry to hold the country hostage when they fail because there's equal opportunity for other industries to do that too if they too can become large enough?
Like General Motors?
Re: Friends don't let friends get into finance
#130Earlier quoted context omitted.
On the contrary, it encourages disfunction. "Let us remove the consequences of your failures." Gee, I wonder if that memory will make them so grateful that they'll be more careful next time? Sure. It's not like their whole industry is about predicting risks and rewards based on past experience. Bah. The mistakes will be repeated and the bailout question will arise again. And it will be worse next time. We should have…
You guys are hilarious with your chests puffed out screaming about death to the financial players who were in trouble. Have you considered the massive negative shock to liquidity that would have resulted? Goldman Sachs, JPMorgan Chase etc. deal with an inordinate amount of the world's liquid assets. If they had failed, the problems wouldn't have been a few quarters of negative GDP growth--we could have seen the colla…
Speculation.