[fddhjjj]

I cited three examples of financial engineering. Just to be clear you oppose mortgages, index funds, and ATM machines?

I agree all of these or at least mortgages and index funds probably increase inequality especially given uneven access. As far as tangible goods — home ownership, retirement savings, and less time spent waiting at the bank.

[freemint]

The first Master of Financial Engineering degree programs were set up in the early 1990s. The earliest financial engineers (under a different name) might have started around in the late 1970s. [Wikipedia - Financial engineering]

Mortgages were invented way earlier. ATMs are an earlier invention. If you use todays categories they would have been invented by automation engineers.

While index funds are a financial product they were invented before financial engineering became a thing. Financial engineers are not needed to run index funds. They are employed to out perform them.

"Financial engineering plays a key role in the customer-driven derivatives business — delivering bespoke OTC-contracts and "exotics", and implementing various structured products — which encompasses quantitative modelling, quantitative programming and risk managing financial products in compliance with the regulations and Basel capital/liquidity requirements."

And i am not alone with my distain.

"The financial innovation often associated with financial engineers was mocked by former chairman of the Federal Reserve Paul Volcker in 2009 when he said it was a code word for risky securities, that brought no benefits to society. For most people, he said, the advent of the ATM was more crucial than any asset-backed bond."

As for definition of financial engineering, i takes those from http://www.wirtschaftslexikon24.com/d/financial-engineering-...

The term financial engineering is also used insofar as it is about the use of innovative financing and risk hedging instruments. In this sense, financial securities are first broken down into their basic elements, e.g. interest, repayment, currency, maturity, security, additional rights (»stripping«) in order to be able to evaluate them (individually) better. Based on this, new, optimal financial titles are created during »Replicating«, in which the modules are optimally combined according to the respective financing case.

The concept of financial engineering can be seen in summary as the design, development and implementation of innovative financial instruments and processes as well as the realization of creative, tailor-made solutions for investors and buyers

[fddhjjj]

Super interesting and over my head but to oversimplif: automation and old financial “tools” (mortgages, index funds) good but (excessively?) “innovative financial instruments” is a bridge too far.

Still hard for people not deep in it — me — to see clearly that crypto doesn’t contain the seeds of a better index fund or a cheaper mortgage.

[RC_ITR]

You did not cite 3 examples of "financial engineering," you cited examples of "financial services."

If crypto made it meaningfully easier to borrow capital to invest in utility assets, then I'd :heart: it too. (Mortgages)

If crypto made it meaningfully easier to own equity capital in assets priced by utility, then I'd :heart: it too. (ETFS)

If crypto made it meaningfully easier to transact for utility goods/services with my capital, then I'd :heart: it too (ATMS)

Crypto dos none of these things.

What it does do, is it allows me to arb trade against misinformed retail liquidity providers who foolishly put their capital into DEX's.

[fddhjjj]

Can you provide a decision rule that distinguishes financial services from financial engineering?

I do not feel as confident as you seem that the group of things called “crypto” will not be useful for financial services.

[RC_ITR]

My definition: Financial engineering is the quantitative isolation and amplification of financial risk/reward, usually through leveraged/synthetic derivative products. There's no perfect source, but you can see similar definitions here [0] [1] [2]

To give you a crypto example of this, Aave is financial engineering, because it allows users to make a bet that they can execute high-volume short-duration trades that yield more than Aave lending fees.

In terms of what is financial services, my definition is: Any action taken that allows capital holders to better deploy their capital into the real (read: goods and services) economy. Again, no prefect source, but [3] [4] [5]

Again the key nuance here is financial services primarily focus on supporting the real economy, while financial engineering is primarily focused on risk/reward

And to be frank, I would absolutely love it if cryptocurrencies supported the real economy in literally any way shape or form. I would get "BTC4Life" tattooed on my forehead, I would dedicate my life to working for the innovators in the space, but unless you've got some secret, I don't think you can give me an example of literally anything cryptocurrency does to support the real economy that a centralized solution couldn't also do.

[0] https://en.wikipedia.org/wiki/Financial_engineering

[1] https://www.investopedia.com/terms/f/financialengineering.as....

[2] https://www.iaqf.org/what-is-financial-engineering

[3] https://www.imf.org/external/pubs/ft/fandd/2011/03/basics.ht...

[4] https://www.cisa.gov/financial-services-sector

[5] https://www.law.cornell.edu/definitions/uscode.php?width=840...

[fddhjjj]

Strong parallels between your definition with “isolation” and that offered by freemint in terms of decomposition into elements.

The nuance makes sense on its face. Although I don’t trust my own judgement of what impacts the real economy and what is just shuffling of decomposed elements of risk and reward.