[FoRK] Chart of the Day...
jbone at place.org
Wed Jun 9 05:13:40 PDT 2010
On Jun 9, 2010, at 1:48, "J. Andrew Rogers"
<andrew at ceruleansystems.com> wrote:
+1 to all of this. Prima facie, most if not all similar pension and
other benefit-in-perpetuity schemes are Ponzi schemes.
> I would think that there would be some cognitive dissonance
> considering your oft-stated objection to "speculators"
A note about "speculators."
There's no such thing. Or rather, there's no meaningful difference
between speculators and any other investor, on some level.
In practice, all these "speculators" that are so demonized of late are
simply part of the market macrostructure. They have always existed in
financial markets --- we have called them market makers,
"specialists," and other terms at various points in the past --- and
are *essential* to the proper functioning of any financial market.
They serve two primary and deeply interrelated functions: to absorb
short-term risk / provide liquidity as they act as temporal
intermediaries between buyers and sellers acting at different points
in time and with differing time horizons, and in doing so to provide
In non- or partially-financial markets, they have their analogues:
they are the wholesalers, warehousers, and transporters of physical
By all sensible empirical measures, the markets these days are far
healthier than they have ever been. Those who state otherwise
generally are those traditional market participants who have seen
their business models eroded as market efficiencies have increased.
The predictable result: attempts to use other means to perpetuate
obsolete business models built on artificial inefficiencies.
For the "retail" investor the results of market structure changes over
the last two decades have been uniformly positive: far lower costs,
more price continuity, and vastly increased liquidity. Even
volatility, much blamed on these "evil speculators," is really more a
function of increased "natural" interest coupled with more widely-
distributed (and hence, better-mitigated) risk due to increased market
monotonicity. In itself it is not a bad thing.
Generally speaking, those who bemoan "speculators" either don't have a
clue about how financial markets actually work... OR they are waging a
disingenuous memetic battle to preserve their own self-interests at
the cost of an overall healthier marketplace.
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