In previous articles I have indicated that I’m not on forehand for system A or system B, but in stead that I need to see that a system will work now and in the future, realizing that there is no system that meets those requirements forever. What I’m convinced about though, is that a system these days needs to be judged on its sustainability and of those underlying aspects deals with its ability to handle the input speed. And if it doesn’t handle the input speeds, the input must be limited or the system changed. Sure there is a lot of complexity below that simple statement, but that doesn’t make it less valuable.
Speed applied to the financial system
The financial system e.g. is capable of moving money so fast from one under served opportunity to the other, that the real world representation of that opportunity cannot keep up. Resulting in a willingness to overpay the value of the opportunity, followed by a rapid change into not wanting to pay the fair value and so killing a great opportunity.
A great example of this can be found in the solar industry, due to instabilities of expected taxes credits, the growth of PV panels production in 2008 drove beyond the availability of silicon, so its price rose rapidly. And while facilities increased their capacity, the demand suddenly dropped. It can be seen as the hard hand of capitalism, but that doesn’t mean it is healthy and that we shouldn’t try to improve on that mechanism as it benefits only the financial transaction group.
At a higher level it can be seen as money hopping from one place to the other without supporting a sustainable purpose, besides making more money that is not coupled anymore to real world output. And without a real world coupling, money is useless, you cannot eat it, drive with it, although you could construct a shelter with it.
How could it be restored?
An observation I have made before and seen more and more evidence of lately is that many innovations dealing with money and organization aren’t new at all, what is new is the scale of usage and the speed with which these “innovations” have been applied. So maybe there are old “innovations” that would do well, but first let’s redefine the problem as “the inability of the investment money to stick to the opportunity long enough to make it successful”. The logical question is why does it not stick? Looking at high level answers, trust rises to the surface fast, as they say it comes on foot and leaves on horseback.
What is needed for trust?
- Transparency (You need to know what is going on)
- fair control (You want to be able to influence the decision, and share profits)
- Accountability (You want to hold people responsible who have misrepresented facts and action)
Like it or not the above have not been implemented effectively in the financial system that financed the growth of the economy the last decade. The good news however is that there is an organization, the co-operative, that has proven to work and support the required trust and could be used again to organize capital and business and direct them towards sustainable growth. The co-operative has been leading to create the industrial and agricultural revolution. Although a sustainable growth will probably not growth that fast, as an end result it will most likely produce more growth than what we have seen taking into account that what exchange indexes ( DJI, AEX) tell us, we are as far as we were 12-13 years ago, or in other words zero growth since 1996-1997. A slow growth makes then more sense.
