[FoRK] Scary study on how lack of IPOs is harming US economy

Jeff Bone jbone at place.org
Tue Nov 10 11:57:44 PST 2009


Re: Glass-Steagal and Ken's 4 points from Wikipedia:

(1) GS is shooting an ant with a cannon with respect to this point
(2) Ditto, plus usual boogeyman populist BS about evil financial  
institutions
(3) Ditto, even moreso
(4) Fine to a point, though vacuous and subtly contradictory of (2,3)

Look, it all depends on definitions and desired outcomes.  There are  
tradeoffs all around.  The bottom line is that in a bits-based  
economy, there is *no* durable, risk-free store of value.  None is  
possible, period.  (The same can be said for an atoms-based economy,  
but the problem of "protecting" your value is at least a bit more  
straightforward for our primate brains.)

Therefore:  how much risk do you want to take, and what should it  
afford you (in terms of other benefits, like innovation?)  The problem  
is that politicians pander to the popular fear and distrust and sell  
them an outright lie about how secure *any* bank (sorry, "depository  
institution") *can* be.

Stick your money under the mattress.  No wait, that doesn't work, then  
the central bank and government conspire to steal its value away from  
you a little bit at a time, continuously, through deficit spending and  
inflation of the currency.

Bottom line, if you want to get some kind of societal Pareto outcome,  
assuming (badly) any such is possible:  you've got to *start* by being  
realistic about the limits involved in the processes and clear about  
what you're attempting to achieve.

Glass-Steagal does none of the above well.

I'm not saying that there aren't benefits to building a wall around  
depositories.  I am asserting (without providing any further detail;   
exercise left to the reader) that there are obvious limits to the  
extent to which such can be effective in a global market absent global  
and complete coercive enforcement;  and any benefits that might be  
obtained also have costs in terms of the operation --- completely  
obscure to any politician, apparently --- of financial and capital  
markets, with *real* negative impact on innovation, technological and  
social progress, and quality-of-life improvements.

"Money wants to be liquid" is a nice aphorism along the lines of  
"information wants to be free."  Evocative, not particularly correct,  
but you get the point.  A better way to think of it might be that  
money is some liquid that seeks some point in the landscape providing  
some optimal balance of risk and reward.  The myth of the risk-free  
depository can be understood in this metaphor as something akin to  
trying to keep the sea out of New Orleans.

jb



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