Dead-end of Financial Capitalism

Industrial revolution was possible because there were investors to support manufacturing goods.  People invented electric appliance and made their lives better and efficient.  However, the money that is supposed to make people’s life better nowadays makes many types of casino that provides places to play “financial games” instead without producing goods and services.

 

In order to create more value from money and to play zero-sum game that divide winners and losers, people try to gain better and reliable information or to make statistical models to analyze trends of economy and market.  Doesn’t it sound like gambling?

 

When I resigned the investment bank and came back to Japan after getting a MBA degree to join the current company, an old colleague of mine told me investing in bonds and stocks would be like betting horses and boats.  I claimed that bonds and stocks are not the same as horses and boats as financial instruments are based on sophisticated knowledge about economy and company performance.  Well, reflecting what I said to him, I don’t think I would answer to him in the same way now.

 

I wonder how many of you think about investing in financial market provides better lives for people.  There will always a winner and a loser when someone invests.  The winner might be either someone who bought it or who sold it and, in either case, there will be always a loser.  In a trading room of an investment bank, an expert always makes profit by forecasting the trend, either bullish or bearish.  However, there was one day when everyone stopped trading; Black Monday.  Well, I made a small buying order for my personal account on that day and next day its settlement was confirmed. When my boss saw the settlement confirmation, he screamed and said, “You’re CRAZY, Hiromi!”   

 

The other day, FRB announced that they might tighten up their interest rates.  Then many investors considered that it was a sign of US economic recovery and they withdrew most of the money from emerging markets back to U.S.  When they realized U.S. Economy hadn’t come back as FRB did not tighten up the rates, they scattered their money to other markets.  What do you think these money flows provide at the end of the day?

 

We will have Olympic game in 2020 in Tokyo.  It looks like the Japanese economy is coming back with Abenoics that would invite foreign capital into Japan.  Now, what would happen when the Olympic game ends in 2020?  The money will go out of Japan and Japanese economy is going to go down again.

How do we find a better system to support healthy economic activities away from such a financial capitalism?

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