Discussion
So *that's* what tempted me into one more blog post for the year - an absolutely perfect distillation of the uselessness of "the biggest business in the world," whose masters are the degenerate gamblers wh buy and sell our politicians, set our policy, and control our lives. They're the ones enshittifying the internet, burning down the planet, and pushing Elon Musk towards trillionairedom.
It's their world, and we just live on it.
For now.
10/
The piece in question is John Lanchester's "For Every Winner A Loser," in the *London Review of Books*, in which Lanchester reviews two books about the finance sector: Gary Stevenson's *The Trading Game* and Rob Copeland's *The Fund*:
https://www.lrb.co.uk/the-paper/v46/n17/john-lanchester/for-every-winner-a-loser
2/
It's a long and fascinating piece and it's certainly left me wanting to read both books, but that's not what convinced me to do one more newsletter before going on break - rather, it was a brief passage in the essay's preamble, a passage that perfectly captures the total social uselessness of the finance sector as a whole.
3/
Lanchester starts by stating that while we think of the role of the finance sector as "capital allocation" - that is, using investors' money to fund new businesses and expansions for existing business - that hasn't been important to finance for quite some time. Today, only 3% of bank activity consists of "lending to firms and individuals engaged in the production of goods and services."
4/
The other 97% of finance is *gambling*. Here's how Stevenson breaks it down: say your farm grows mangoes. You need money before the mangoes are harvested, so you sell the future ownership of the harvest to a broker at $1/crate.
The broker immediately flips that interest in your harvest to a dealer who believes (on the basis of a rumor about bad weather) that mangoes will be scarce this year and is willing to pay $1.10/crate.
5/
Next, an international speculator (trading on the same rumor) buys the rights from the broker at $1.20/crate.
Now come the side bets: a "momentum trader" (who specializing in bets on market trends continuing) buys the rights to your crop for $1.30/crate. A *contrarian* trader (who bets against momentum traders) short-sells the momentum trader's bet at $1.20. More short sellers pile in and drive the price down to $1/crate.
6/
Now, a *new* rumor circulates, about conditions being ripe for a bounteous mango harvest, so more short-sellers appear, and push the price to $0.90/crate. This tempts the original broker back in, and he buys your crop back at $1/crate.
That's when the harvest comes. You bring in the mangoes. They go to market, and fetch $1.10/crate.
This is finance - a welter of transactions, only one of which (selling your mangoes to people who eat them) involves the real economy.
7/
This is a small personal instance of Bonfire in the Fediverse.
