Re: e$: Geodesic Securities Markets
I don't really want to thrash this out point by point, but I will anyway ;-).
Perry Metzger says:
Robert Hettinga says: Strong crypto accomplishes 1, and e$ protocols make 2 and 3 meaningless.
Not really. Not all commodities are fungible.
Agreed. And?
Not all entities are willing to conduct all sorts of trades with all other sorts of entities.
No, but buyers of a specific security might want to buy those securities from those who hold them... Could you elaborate on your comment, please?
Besides all that, someone has to hold physical goods,
Unless it is a stock, bond, derivative, call option, etc. Most of which are "held" in offsetting book entries at brokerage houses, banks, and clearinghouses. If it's not kept there, then you need a certificate of some sort (though I'm hard pressed to have heard of a certificate for a call option, say), which might as well live on a hard drive as a desk drawer. I guess I was saying that it could be that a "certificate" on a hard drive was as tradeable, as "liquid"? as book entry in a clearinghouse.
and investing will continue to be a realm for which expert advice is purchased.
I thought I did say that people like portfolio managers, anal(ah, I *didn't* say *analysts* back there... OK. There. I said "analysts")lysts, investment bankers etc., still played their usual roles. For example, a market analyst essentially sells his time to a brokerage house to write reports on securities. Those reports are then "sold" to the brokerage's customers in exchange for brokerage fees. They don't have to work for brokerage houses any more, even. In the institutional markets, it is now a common practice for some percentage of a commission to go on a soft-dollar basis to third party analysts for their work. (There was a time 10 years ago or so where portfolio managers were getting *junkets* to investment "seminars" in tropical locations on soft-dollars. They don't do that much anymore, I'm told.) In an e$conomy, you sell your reports direct. Newsletter writers do it already. Our "Peter Lynch" (forgive me Mister Lynch, I take your name in vain) successor sitting in Marblehead would do some background e$ transaction to have the report stuck on the screen of his trusty UltraPowerMac VXXI (next to a Ren-N-Stimpy rerun) as soon as it came out. In that case, as we said before, the mutual fund is where the investment advice, the "editing" *is* being purchased. But if an individual, or even a professional trading his own money for his own profit, wanted to trade, he only need put up one of two things to do so. Money if he's buying, of the securities if he's trading. In either case you don't really need a brokerage firm for that... Thanks Perry. Cheers, Bob ----------------- Robert Hettinga (rah@shipwright.com) "There is no difference between someone Shipwright Development Corporation who eats too little and sees Heaven and 44 Farquhar Street someone who drinks too much and sees Boston, MA 02331 USA snakes." -- Bertrand Russell (617) 323-7923
Robert Hettinga says:
I don't really want to thrash this out point by point, but I will anyway ;-).
Perry Metzger says:
Robert Hettinga says: Strong crypto accomplishes 1, and e$ protocols make 2 and 3 meaningless.
Not really. Not all commodities are fungible.
Agreed. And?
And the result of that is that intermediaries are needed in such cases to handle the transactions if the things being traded are complex instruments. Its fairly easy to envision a system that directly matches orders for shares in IBM. Trying to match up buyers and sellers of swaps might not be that easy.
Not all entities are willing to conduct all sorts of trades with all other sorts of entities.
No, but buyers of a specific security might want to buy those securities from those who hold them... Could you elaborate on your comment, please?
Certainly. In the foreign exchange market, for instance, most trading is done on blocks of millions to hundreds of millions of dollars worth of currency. In the current scheme of things people will only deal with entities that they know because fails are devistating. It is possible for third parties to guarantee credit to open up markets, but they will expect to be paid for this. You can't get rid of the banks -- someone has to guarantee that you have the money on hand.
Besides all that, someone has to hold physical goods,
Unless it is a stock, bond, derivative, call option, etc. Most of which are "held" in offsetting book entries at brokerage houses, banks, and clearinghouses.
Actually, even in the case of securities largely settled by book entry, DTC still holds physical certificates. That is not, however, the point. The point is that no matter what you hold, be it dollars, shares of IBM, or futures contracts for dried silkworm cocoons (a perfectly real commodity, by the way) you need a bank to hold the account and guarantee the existance of the thing being held, be it a figment of the computer's memory or a thing backed by a bar of gold. The banks will expect to be paid for this service. Try imagining a digital cash algorithm that DOESN'T involve a bank, and you will swiftly see that there is a small problem involved... This is not to say that transaction costs can't be radically reduced, and the role of intermediation in fully fungible goods reduced. However, transaction costs will not go to zero, and banks will not disappear. (I suspect conventional interest bearing accounts may be fully replaced by mutual funds at some point, however.) Perry
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