Financial Markets are one of several defining traits of life under Liberal Capitalism. They are financial institutions designed specifically to facilitate transactions pertaining to the purchase and sale of Kapital. This form of Kapital refers the assets of Securities such as Stocks, Bonds, Futures, Commodities, Derivatives, and so forth. Financial Markets are also responsible for overseeing the Forex (‘Foreign Exchange’) of Currencies and more recently Cryptocurrencies. Understanding how they operate is crucial in understanding why they should be replaced with more suitable alternatives during the implementation of the Work-Standard.
Contrary to popular belief, Financial Markets are not reliable gauges for determining what shall be the overall health of any economy. They are at best representations of what ought to be the overall health of any economy. In a sense, this difference is but a well-known example of David Hume’s Is-Ought Problem from the Enlightenment. The Financial Market is driven by the opinionated conclusions of what a select few investors would like any economy to be, rather than demonstrating an understanding of what the state of any economy is and where it is heading. If the Financial Markets claim that the economy is ‘doing well’, then that is their opinion and not a credible representation of actual fact.
There are several types of Financial Markets that currently exist. Each one operates on the dialectics of Kapital Lending/Borrowing. Transactions can be conducted by actual human investors or else automated on the investors’ behalf by special software programs.
Stock Markets specialize in Stocks pertaining to a stake in the ownership of firms or businesses. To ‘buy’ a Stock is to borrow ownership of firms and businesses for Kapital; to ‘sell’ a Stock is to lend that same ownership of firms and businesses for Kapital.
Bond Markets specialize in Bonds. To issue a Bond is to lend Schuld (Debt/Guilt) for Kapital; Speculative-grade Bonds are ‘Junk’ while those issued by the nation-state’s Financial Régime are considered ‘Investment Grade’ because the government was guaranteed to pay it back.
Commodities Markets and their associated Real Estate Markets sell ownership of valuable natural resources and land. They specialize in the outright lending of ‘Assets’ or else the borrowing of Certificates for Kapital. Actual Kapital is lent as actual Schuld for shorter-term financing and investments, reserving the Bonds for longer-term financing and investments.
Derivatives Markets are the byproduct of technological innovations within the emerging field of financial engineering after the death of Bretton Woods. Derivatives are a form of Kapital whose Value depended on ‘Underlying Statistical Correlations’ in an Asset or a basket of Assets, Interest, another Derivative, or an Index. While Derivatives include all forms of Insurance, Collateralized Schuld Obligations and Credit Default Swaps according to the Timing of their payment: Over-the-Counter (‘Now’), Spots (‘Imminent’), Swaps (‘Soon’), Options (‘Eventual’), Futures (‘Later’), and Forwards (‘Someday’).
Interbank Lending Markets offer more of the same borrowing and lending, but between privatized commercial banks and the Central Banks of Financial Régimes. This is where the Central Bank will oversee its operations ranging from setting Interest Rates to conducting Quantitative Easing (QE).
Cryptocurrency Markets represent the latest development in the growing abstractness of Kapital. Operating on parameters comparable to the Forex Market, they consume copious amounts of electrical power and computer power to facilitate the Blockchain required for the production and distribution of cryptocurrencies. They are often unstable and prone to fluctuations in terms of Currency Depreciation/Appreciation due to lacking the stability of actual Currencies.
Forex Markets are arguably the simplest and most fundamental of the Financial Markets. They are responsible for overseeing the exchanges of Currencies according to the Incentives of Supply and Demand. They determine the Value of any traded Currency based on its given Price. The Price of the Currency, due to the widespread prevalence of Floating Exchange Rates after Bretton Woods, fluctuations according to the whims of the Forex Markets.
As stated earlier, almost everything about the Financial Markets revolve around the borrowing and lending of Kapital, with or without Interest. It is true attempts have been made in the past by the Planned and Command Economies of the 20th century to forgo Financial Markets. Basically, this was done as a result of having the State itself set and enforce the Pricing of everyday goods and services by governmental bodies of economic planners. The problem with that arrangement is identical to the same problem with Financial Markets: they too are driven by opinionated conclusions that are not only reflective of actual economic conditions.
Rather than try to play into the follies of Financial Markets by operating within their own framework, what the Work-Standard truly needs is a viable alternative. It would entail the creation of a different financial instruction attuned to the specifications of the Work-Standard, where the dialectic of lending and borrowing and its Incentives of Supply and Demand are predominantly supplanted by the gifting and receiving of Arbeit and Geld under the Intents of Command and Obedience. In essence, Arbeit can be exchanged into Geld and Geld exchanged back into Arbeit. Such financial institutions would then be owned and operated by the State, tasked with relaying information to and from all sectors of economic activity. They would help the State determine and set the Pricing of goods and services within sound parameters while at the same time enforcing those directives. And they could also revolutionize the Four-Year and Five-Year Plans employed by previous and current Planned and Command Economies.
Such a financial institution is definitely within the realm of possibility. Not only will it be feasible to envisage it replacing Financial Markets, it can also help a Planned or Command Economy reduce the need to operate these infamous “Hard Currency Shops” of the Soviet, Eastern Bloc, and Maoist Chinese economies.
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