Sapere Aude
Tag: finance
and need to be replaced with entities competent with technology.
It is absolutely mind-boggling that such an anachronistic process even exists in 2012. In a world where truly enormous real-time data sets are routinely captured and analyzed in the time it takes to read this sentence. In this world, we continue to produce one of the most important inputs into global financial markets using the equivalent of a notebook and a biro… WTF???
The Fed could kill checks but isn’t. the 19th century checks business is not just embarrassing but hugely inefficient and harmful for the economy.
IFT — the ability for me to pay you, and for you to receive the funds within minutes, rather than having to wait until the following business day — is already a fact of life in many countries around the world, from India to the UK. Where it doesn’t already exist, you can be pretty sure that someone is working hard on a plan to make it happen. Except in the US, where no one seems to have even started the process yet.
checks, just like smallpox, can be eradicated. the obvious way is to slap a surcharge on them to reflect the true cost.
the startups mentioned in this piece are giving me hope that finance can move from a model where scammy idiots play with your money while you get to wait in line every saturday at their temples of mediocrity to perform banal transactions, to one where algorithms provide you with advice and opportunity.
bank assets as a % of GDP:
Luxembourg 2461%
Ireland 872%
Switzerland 723%
the US was 80% at the time of the bailout in 2008. this is going to end well for europe.
transaction costs need to sink to 0 to really grease the economy. and destroying part of the financial industry is just an added social good.
Business Insider interviews Ben Milne, founder of an online payment system called Dwolla that charges a flat fee of $0.25 per transaction (unlike Paypal, Square, credit card companies, which charge a %).
treat it as infrastructure, like electricity. automate everything, fire 98% of financial services employees. the remaining employees are like sysops / on call, and certainly don’t get to play with other people’s money for a living. reward companies that can lower transaction costs and overhead, so no more physical presence, no marble halls.
if you let interest compound for 100s of years, you get the wheat and chessboard problem. we also learn that ben franklin was an early cryogenist. his preservation medium: madeira wine.
Hartwick College didn’t really mean to annihilate the US economy. The college inherited a 1000-year trust that would not mature until the year 2936: a gift whose accumulated compound interest “could ultimately shatter the nation’s financial structure.” After decades in the courts, Holdeen’s economic Armageddon ended not with a bang, but with a whimper—and a dividend check.
Hartwick College got its 1000-year trust, still bearing its maturation date of 2936; the principal now stands at an impressive $9m. Rather than accumulating and compounding, though, the trust pays out $450k a year to the college.
the governments of Switzerland, Germany, France, and the UK should all be sending thank-you letters to 33 Liberty Street if they haven’t already done so: it’s entirely possible that the New York Fed bailed out their banks without those governments even knowing about it.
Left alone in a dark room with a pile of money, the Irish decided what they really wanted to do with it was to buy Ireland. From one another. An Irish economist named Morgan Kelly, whose estimates of Irish bank losses have been the most prescient, made a back-of-the-envelope calculation that puts the losses of all Irish banks at roughly €106b. At the rate money currently flows into the Irish treasury, Irish bank losses alone would absorb every penny of Irish taxes for at least the next 3 years.
ireland is so screwed, going through a monopoly hangover.
The trading bots visualized in the stock charts in this story aren’t doing anything that could be construed to help the market. Unknown entities for unknown reasons are sending 1000s of orders a second through the electronic stock exchanges with no intent to actually trade. Often, the buy or sell prices that they are offering are so far from the market price that there’s no way they’d ever be part of a trade. The bots sketch out odd patterns with their orders, leaving patterns in the data that are largely invisible to market participants.
just robot traders crossing in the night, or deliberate addition of noise?
Gregor J. Rothfuss 