OUT OF THIN AIR

Posted in Uncategorized on September 9th, 2013 by Ed

I have a couple of mostly dormant brokerage accounts. In the past – before I went to grad school – I traded moderately actively, albeit on a small scale as befitted my income. Since I no longer have the time to devote to proper research (and buying stocks without that is essentially throwing money away) I don't do it much anymore. Over the summer I was able to give it a bit of attention, and in August I was able to execute a couple of trades that returned about a 50% profit in 2-3 weeks.

Lacking great amounts of capital, any transaction I could make in The Market is totally, almost unfathomably inconsequential. With literal trillions of dollars being moved around electronically on a daily basis, the dollar amount I bring to bear on the world financial markets is less than a spit in an ocean. I don't even register.

That said, I've found over time that my tolerance for the absurdity of the whole enterprise is in decline. Every time I make a profitable transaction now, I can't stop thinking, "Why do I have more money now? I didn't do anything." And I didn't. Nobody who plays this game does. It is a world in which nothing is produced and destroyed except money itself. One day you buy something for x dollars. The next, you sell it for 1.5x. Your personal profit is money created out of thin air.

And this, on a much larger scale, is the dominant profession of our financial (and social, and political) elite. They create ever more complex financial instruments out of other intangible financial assets and then they sell them to one another and everyone walks away with money even though nothing happened. The old saying about the stock markets being a form of liar's poker is a lie inasmuch as poker is a more legitimate enterprise. Real money changes hands between real people performing a transaction with a payout agreed upon in advance.

These people – our Producers, our Galtian heroes, our Job Creators – are people who don't actually make, create, or produce anything. It's all blips and clicks and algorithms and trades programmed to self-execute when defined parameters are met. It takes knowledge and a specific talent to do this successfully; that is indisputable. Regardless, I can never wrap my mind around how…intrinsically worthless are the "assets" involved in this game. The only thing that the hedge fund manager or the day trader creates is personal wealth. He buys something, sells it to someone else for more than he paid for it, and the buyer attempts to repeat the process. It's not a zero sum game. Inflation? Hell, the game of buying low and selling high can, in theory, continue indefinitely.

If it did, it still wouldn't create anything except personal profits. This brings us to familiar territory, to the cornerstone of the New Economy: servicing the personal consumption of the financial elite. They might not "create jobs" in the direct, tangible sense that the robber barons did, but think of all the peons needed in the service industry to tend to their mighty needs! Every time Chad from Harvard Business School makes a killing, another hotel chambermaid on St. Maarten is born. Another personal assistant rises from the Earth. Behold the mighty act of creation! Our economy is indeed a thing of splendor.

It should come as no surprise that an economy firmly rooted in nothingness has high levels of poverty and unemployment. The very rich and the very poor have in common that they do nothing. They simply are compensated differently for it.