[rokob]

> something is valuable because some people think other people will pay more for it in the future, and not because it does useful things

This has been the definition of finance for hundreds of years. I don't know why it comes across here like this is a new phenomenon.

[inigyou]

It used to be only a few steps removed from actual value. Like an empty lot is worth an amount because when you plant trees it's worth an amount because when it has fully grown trees it's worth an amount because when you cut down the trees the timber is worth an amount. That's an acceptable function of finance, it allocates the value of a logging plantation between several different people who may own it at different times, so that one doesn't have to hold it for the full 20-year growth cycle to realize any value from it.

[Schiendelman]

We needed to develop long-term value instruments to incentivize long-term planning. Bonds are necessary for large public projects, for instance. There are many complexities in deriving instruments from that basic concept. What makes you think a particular one shouldn't be acceptable and why?

[pooploop64]

There used to be much more of a belief that the reason this stuff has an appreciable value to speak of is because it's either creating a channel for society's productivity or it's creating a position to skim pennies off of society's productivity. But less and less does it feel like productivity is even in the equation anymore. What the quoted statement describes is much closer to a Ponzi scheme than what finance is actually supposed to be about, but it's getting harder and harder to tell the difference.

Also if the cutoff point for raising concerns about this was hundreds of years ago that really sucks for everyone alive today.

[Schiendelman]

Is there a particular instrument or transaction you feel creates a scheme? What specifically would you disallow, and what would be the downstream impact you imagine of doing so?

[pooploop64]

It's like I said, the degree to which productivity is in the equation.

Money just looping around until settling on a few people, otherwise doing nothing else = zero productivity, zero value

Action which results in a bit of productivity = a bit of value

Action with results in lots of productivity = lots of value

I'd say the exact degree of separation where it becomes "a problem" is roughly equal to the exact number of sand grains that form a pile. I can tell you one area where society is already suffering greatly from dead economy and that's the housing market. The downstream impact of that industry not being realistic is happening right now.

Also I would like to refer people to a story called "The Golden Goose." Everyone seems familiar with it but it doesn't seem like most people have seen the end.

[Schiendelman]

Every derivative of productivity is measuring future productivity. What specific product were you thinking didn't?

[badlibrarian]

Finance has always run on both: an asset that produces something has a floor. An asset that produces nothing does not. Between the two lies human nature. One way to get rich is to focus on fundamentals. One way to get rich or poor faster is to bet on human nature.

[bigbadfeline]

>> something is valuable because some people think other people will pay more for it in the future, and not because it does useful things > This has been the definition of finance for hundreds of years. I don't know why it comes across here like this is a new phenomenon.

I don't think so. However, you can convince me by providing a reference to that definition in a textbook used by top schools, I'm honestly curious to see something like this.

[roxolotl]

Just because something is doesn’t mean it ought to be. We’ve settled on this system because it seems to be generally the most effective way of valuing things. In times of extreme changes in valuation it comes off as more egregious than normal.

[fuzzfactor]

Well if it's eating the economy to an unprecedented extent of morbid obesity, it might lead to the most massive stroke and complete or partial collapse.