The Semiotics of Markets

By Sell on News, a global macro equities analyst. Cross-posted from“>Macrobusiness.

The Economist this week had an interesting discussion about the epidemiology of financial contagion. It is interesting to observe the use of language. The article starts out with a correct observation about how economists choose a particular type of language used to lend their observations credibility:

Economists, who like to borrow medical terms to lend themselves an air of scientific rigour, call this “contagion” (see also: Dutch disease, liquidity injection, etc). Economic troubles in one country can infect others. Can economic epidemiology predict which countries might fall sick following a Greek exit?

The hint of irony here suggests a sensible scepticism about the use of models from other disciplines in economic discourse. But then another metaphor is adopted: water and ripples, in its place:

It has long been known that shocks in large countries or markets send out ripples. In a 1989 paper Robert Shiller of Yale University showed that between 1919 and 1987 American and British stockmarkets had moved in tandem, but that this correlation could not be explained by parallel changes in dividend payments.

The metaphors are extremely revealing. Irrespective of whether one sees financial contagion as a disease — viruses or microbes some other unnamed horror running around the world mucking things up — or as some kind of fluid similar to water but not quite water, there is a fundamental logical error. Capital markets are made up of transactions. Each transaction is both an artifice and a set of rules made by self aware people. In neither case is it a natural “thing” that “flows” about a bit, or “infects other things”. No matter how attractive it is to try to observe in it quasi-scientific fashion, either as a form of biology or physics, it has zero chance of working effectively. If, by some rare chance, it did happen to work as an analysis a few times, it would immediately be adopted by traders and cease to work.

So where should we look instead for models that might be a bit more effective? We can safely disregard neo-classical economics — that is, quasi physics — as nonsense, but what other models might be useful? I can think of quite a few, but here I will briefly glance at one. Semiotics, or the study of signs. Charles Peirce, the pragmatist philosopher and father of semiotics described a sign as this:

I define a sign as anything which is so determined by something else, called its Object, and so determines an effect upon a person, which effect I call its interpretant, that the latter is thereby mediately determined by the former.

That is not a bad description of how finance operates. The object of money is something else — what money buys — and money determines an effect on a person (usually fear, greed, buying an expensive Mercedes or declaring oneself bankrupt). Money, according to this approach, is a sign. Not a tangible, physical thing, or water, or some kind of strange disease. And those three elements: the sign, what the sign points to, and the person interpreting it are not a bad way of characterising what finance is: money, what money buys and the traders who interpret the whole game. It matches what Peirce framed:

a sign signifies only in being interpreted. This makes the interpretant central to the content of the sign, in that, the meaning of a sign is manifest in the interpretation that it generates in sign users.

That is what happens in financial markets. The meaning of money (the sign) only becomes evident from traders’ behaviour. So, if we approach financial markets as semiotic systems, then we should focus on how traders derive meaning from the signs they are watching (in their pursuit of Mercedes, lap dancers or strange white substances).

Now of course, there is far more to Peirce than this, much of which I do not understand. But analysing financial markets in terms of his ten classes of signs might get a lot closer to what is really happening in the global financial markets. The weird worlds of meta money that we have created. It surely has to be a lot better than water or viruses, the interchangeable metaphors preferred by The Economist:

Ripples from the Mexican and Asian shocks spread further than expected. The contagion puzzle was still unsolved. Kristin Forbes and Roberto Rigobon, ”No contagion, only interdependence: measuring stock market co-movements“ both of the Sloan School of Management at the Massachusetts Institute of Technology, were among the first to give an explanation. They showed that in good times spillovers between countries don’t matter much—so markets can appear not to be related. But during a crisis, when volatility rises, pre-existing links between economies suddenly have huge effects. This finding was striking: a dormant interdependence of economies was spreading disease like a shipful of flea-covered rats. This suggests that economies are far more linked in bad times than their ties in good times suggest.

If you ask me, it is this way of describing things that is the ship of flea covered rats.

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  1. IsabelPS

    This is way above my head. I am a biologist, a simple soul, and a couple of concepts, like negative feedback, frame my thinking.

    Without negative feedback no living organism would survive, or put in other words, a living organism is a structure that tends to equilibrium, and that equilibrium is its very form and existence. Without negative feed back it is impossible to keep the equilibrium, and the structure cannot survive.

    Negative feedback might very well exist in the real economy, that might very well tend to equilibrium. But it certainly does not exist in finance. On the contrary, all I see is positive feedback, that leads sooner or later to explosion, implosion or whatever word you want to use. In the long run, one can see the whole thing as a succession of situations of creation-destruction. But no tendency towards equilibrium whatsoever.

    1. F. Beard

      Well said! And interestingly, those in finance often confuse positive and negative feedback. Positive feedback is good and negative feedback is bad in their minds!

      But nevertheless, negative feedback does exist in the economy else it would not oscillate (if I remember my control systems theory correctly).

      1. groo

        F. Beard,

        not quite,
        it is positive feedback which leads to ‘wild’ oscillations.
        Add some -carefully calculated- negative feedback, and you get ‘controlled’ oscillations. (eg Wien bridge)

        What sometimes mistakenly is termed ‘negative feedback’ in the purely positive-feedback case is the energy-constraint of any system.

        This actually is the standard case Isabel referred to, as a biologist.
        eg Population dynamics is energy-limited.

        The more brutal variant being a melting fuse, if there is one. Then you call the repairman, if there is one, or do-it-yourself, if you are competent.

        Now whom exactly economists call, to repair their ill-designed system?

        Well, they should call the grownups, right?

        But who are those?

        1st guess: Systems-Analysts.

        Here we are.

        1. F. Beard

          it is positive feedback which leads to ‘wild’ oscillations. groo

          Yes, positive feedback is needed for an oscillator but if no negative feedback is present, wouldn’t the system simply saturate at one extreme or the other? I’m thinking of an op amp with the output tied to the positive input terminal.

          1. groo

            …but if no negative feedback is present, wouldn’t the system simply saturate at one extreme or the other?…

            Yes, ofcourse.
            The supply lines in this case represent the energy-constraint.

            The topic of energy-constraints –as a theory– is poorely developed, even in engineering.
            I remember reading ONE book in my twenties (as a student of cybernetics) about a ‘theory of energy constraints’, which did not quite register in me, because nobody cared anyway.

            The concept of infinite resources abstracts away this problem, which, for biologists studying organisms and ecosystems is an everyday problem.
            But the theory-building power of biology -except ‘Evolution’- is not strong.

          2. F. Beard

            Lack of energy is not the problem. The thorium guys say we have enough for hundreds of thousands of years. The problem is the money system.

        2. LeonovaBalletRusse

          “Mother Nature” provides the negative feedback to the dream of infinite “growth” with one phrase: potable water is finite. All else is relative.

          1. be'emet

            could you consider that enthusiasm for Keystone Pipeline is based on the prospect that it will damage aquifers? – and thus improve opportunities for sale of processed water…

            in history, “freedom” may be measured as ease of access to water. Intervening authorities start with water supply.

          2. LeonovaBalletRusse

            Correction: Just saw the “chaos” video chez Jesse. See it to the very end.

            Chartists in finance know the meaning of “slope.” As to the climate, the “slope” has been set. There is no undong it. LISTEN to the sober prediction of how much time we have before we broil. The narrator concludes that now, at least, we CAN look “reality” in the face. And to what human effect?

            Will we conclude, like Freddie Mercury, “Nothing really matters to me?” What lyrics to our Bohemian Rhapsody will we write for ourselves?

            Was this the “end” that Jeshua/Jesus knew was inevitable? He knew history.

      2. groo

        the basic insight we gain from our dire situation, is, that not only the system is ill-designed by incompetents, but also too complicated.

        Nature repeatedly had to step back and reduce complexity, such that a moderately decent harmonious whole could develop.

        It did this via the blind watchmaker (metaphor).
        In a sense, our economic and societal fabric is the result of blind forces (and wild guesses) too, although we-as a species, claim to be ‘intelligent’.

        I see some parallels to the Stephen Jay Gould–EO Wilson controversy in our current turmoil, but maybe I’m wrong.
        Have to think about that.

        1. F. Beard

          I don’t see complexity as necessarily the problem but that our money system is inherently dishonest. It is literally based on theft of purchasing power for the (often temporary) sake of the banks and the so-called “credit-worthy.”

          1. groo

            F. Beard,

            it is difficult to disagree with You!

            The ‘complexity’ I refer to, is owed to the fact that ‘theft’ has to be rationalized, which is a difficult task, if You do not want to regress to naked power.
            Propagating a ‘big lie’ is easier and more economical than wasting energy in naked power.

            But at a price, I think:
            Naked power is self-explanatory, and thus simple.
            The ‘big lie’ is not. Scientifically speaking, it increases complexity like with the Ptolemaic system.

            This may even be unconscious, as I suspect.
            The ‘big lie’ is interwoven into the very fabric of our societal construction and adds complexity upon complexity, just to cover the basic error.

          2. Douglas

            It might be based on “theft,” (though most advocates would dub it “reallocation”), but it isn’t dishonest. It’s very frank about what it steals, from whom, and how. One just has to be slightly curious about it, and the answers are all in plain sight.

          3. F. Beard

            The ‘big lie’ is interwoven into the very fabric of our societal construction and adds complexity upon complexity, just to cover the basic error. groo

            In programming we call that a “kludge.”

      3. jake chase

        I forget who it was who said that explanations should not be complicated unnecessarily. Our economy is based upon the creation, servicing and liquidation of debt. Banks control the process in their own (and their executives’ interest). They lend and lend and lend and lend and lend until one day they notice that they are lending against grossly overvalued collateral. So they stop. Without an increasing stream of new loans there is insufficient activity to continue servicing old loans. Borrowers are stripped, jobs are destroyed, the process cumulates unless somebody steps in and begins spending. Keynes showed us that only government could do this. Unfortunately, government has been a degenerate boondoggle for seventy years and no sensible person trusts it. That’s the story from beginning to end.

    2. Susan the other

      i think this article is clearly about the semiotics of politics. What we need are honest-to-god legislators. If we don’t get on this, software written by “self-aware” people will indeed run this country in a metasphere no one will ever control. Our politics have been hijacked, infantilized and simplified to a semiotic state. And all of things that societies need have been obfuscated and redefined to be part of the market which is “made up of transactions. Each transaction is both an artifice and a set of rules made by self-aware people.” This is indeed simplistic and semiotic.

      We need elaborate definitions. Complexity. Not simplicity. Otherwise fast investment will always consume cautious progress. Always. If money is language in its present state, it is a very inadequate language. We need a new code. One that meets the complexities of the present and controls them definitively. Maybe we can’t define money, but we can legally define the uses of money so it can’t escape again.

    3. nonclassical

      but folks,

      2001, “financial sector” forumulated 19% of U.S. economy…by 2007, 41%. We know “derivatives” valued under
      $2 trillion, 2001, and by 2007, over $600 trillion (paper debt), 95% owned by 6 U.S. “investment banks”, 80% of that residing in London financial market…

      I recall an interesting last week NC describing international “investment bank” synopsis, showing banking structures dominate governmental decisions-policies…unlike
      military, which retains national connections, for example..

      Language-terminology is totally important-think “perfect storm”=naturalism, which NONE of these banking decisions are…

      1. nonclassical

        here is article-excerpt to which I am referring:

        “The great European dream was to diminish militant nationalism,” he says. “We would all be happy Europeans together. But we are going to see the old monster of militant nationalism being awoken when people realise how little control their politicians have. We are already seeing political disintegration in Europe.

        Meanwhile, the nationalism of America, Russia and China is much as it has been. Military systems are national, and will remain so. The current geo political battle is over Central Asia, both for reasons of military positioning and for its economic significance, the reserves of gas. There is no sign of a fading nation state, as John Chan reports:

        “In Beijing, Russian and Chinese leaders publicly stated their opposition to the drive by the US and its allies towards military intervention in Syria. In a joint statement, Putin and Chinese President Hu Jintao declared: “Russia and China are decisively against attempts to regulate the Syrian crisis with outside military intervention, as well as imposing… a policy of regime change.”

        Writing in the official People’s Daily, Putin declared: “Without the participation of Russia and China, without considering Russia and China’s interests, no international matter or issue can be discussed and implemented.” Russia and China have blocked UN resolutions for sanctions against Syria.

        Both Russia and China have a great deal at stake in opposing US machinations in the Middle East. Russia has longstanding ties with Syria. Moreover Putin and Hu are well aware that the drive for regime change is also directly against Syria’s main ally, Iran, that is confronting threats of war from the US and its allies. China and Russia have significant economic interests in Iran.”

        It could be argued that this is just transition, but the problems of the “market state” go much deeper. Bobbitt’s argument is largely justified with reference to commerce: international trade and globalisation, altthogh he does mention the capital markets. But what is evident with the series of financial crises over the last 15 years, which used to occur mainly in developing countries but which are now consuming the developed economies, is that the markets that have the real power are financial markets. And these are stateless.

        Worse, they have taken over the role of the state to set the rules of money in a deeply pernicious fashion. Indeed, we can go further. Global financial markets have become destroyers of states, not a new kind of state. That the traders rely, as citizens, on some sort of state structure to live, is merely an irrelevance, an inconvenient aside.
        As I have argued before, it is impossible to deregulate financial markets because money is rules about value and obligation. So what happened instead when financial markets were “deregulated” is that the governments’ role as the setter of rules was handed over to traders, who made up their own rules: more than $700 trillion of derivatives, intense high frequency trading and so on. It results in a weird contradiction: governments trying to save their systems from the new rules being created by the traders, yet the traders relying on the state’s rules about finance to overlay their games of meta money. Meta money traders have to have conventional share trades between buyers and sellers to apply algorithms to manipulate the markets at high speed.

        You need conventional commerce in commodities to use derivatives to play commodity futures, for example. It is why governments are constantly attacked by players in the financial markets who are simultaneously hard at work exploiting those “errors” to make money. Meta hypocrisy to accompany the meta money, I suppose.

  2. LeonovaBalletRusse

    How about “interdependence of leverage” where leverage = sign unknown.

    Also, CEO “earns” 3 million “US dollars” per year (+ prime benes, “bonus”). Apple Salesman “earns” 11.75 “US dollars” per hour. The “US dollar” is a sign of what, RELATIVE to a person’s “pay for work” or “gainful employment? The DISPARITY in compensation above is a “US dollar” SIGN of what? Injustice?

    The “US dollar” is a sign of what in common discourse? to the Fed? to banks? to bankers? to traders? to HFT computers? to quants? to the M-I Complex? to the starving? the poor? the rich? the top-out-of-sight?

    Does a “US dollar” X4 required to buy a loaf of bread carry the same SIGN as a “US dollar” X100,00 required for a “party” with hookers and blow?

    Is the “US dollar” a meta-sign? If so, by whom is it defined, for whom, and for what self-serving purpose?

    1. LeonovaBalletRusse

      Let’s say that the USD is a SIGN of “value.” In the jargon of the day, “going public” produced the “Cash Cow” to be “milked” by manipulation of “stock” claimed to be a SIGN of VALUE of the Cash Cow.

      Does it not follow that the Era of Takeovers CAUSED USD currency DEBASEMENT through “private equity” looting through leverage? Corporate Takeover Inflation–bubbles-for-profit-to-insiders–created by corporate raiders via SYSTEMATIC “debt” schemes DESIGNED to profit the “private equity investors” by “internalizing” “hard” USD assets stripped from the Cash Cow, while “externalizing” the debt of the “investors” to the back of the Cow now stripped of assets, crippled or killed the Cow while ruining employees (eliminated as “cost” to “investors”), and shrinking the Real Economy of the open system of the 99%.

      This Extraction Capitalism scheme of closed systems/sets–DESIGNED to “internalize” USD gains to the set of “private equity managers, traders, investors” and to “externalize” losses/”costs” to Cash Cows and employees–led to massive INFLATION of the USD within closed systems, and massive DEBASEMENT of the USD within the open system, thereby changing the SIGN of the USD in all systems, i.e. the SIGN OF VALUE of the USD.

      This is why we now face the extreme/obscene absurdity of a “minimum wage” @ USD7/hour, and “Executive Compensation” within the closed systems of FIRE @ USD3million-X to the nth. This leaves the USD as SIGN of what to whom? “A house divided against itself cannot stand.”

    2. groo


      valid questions.

      actually a ‘dollar’ is not a ‘dollar’, which is one of the fundamental (self-)deceptions of the capitalis order.

      Now ‘value’ also is not a constant.
      It can change any day.
      Consider a nutritient by some study-outcome termed poisonous.
      Value drops to zero, or even gets negative, because of decontamination efforts.

      Have been meditating a lot about that.

      To rebuild the ‘system’ to me means starting from the ‘basic needs’.
      Those are nonnegotiable.
      This is a stable basic ‘value’.

      Take-home-message: Keep out the basic needs from ANY capitalist endeavor!

      Then let the market-forces play out on vanities, provided they do not destroy the planet, which is, as I argued with F.Beard, the energy constraint.

      Side-effect: Decomplexification.
      Provided that it is taboo to speculate on the basic needs.

      Simple recipe. Will never happen.


      1. LeonovaBalletRusse

        “Love without possession” is the ideal. WHO will stop the private possession, hence control, of the world’s supply of potable water?

        Now, why do we suppose that “control of the Himalayas” is crucial to China? Why does the US hegemon finesse this ISSUE through the Dalai Lama?

        1. LeonovaBalletRusse

          In reality, given that humans under grave distress revert to the “primitive brain and nervous system” for guidance, is there ANY hope for “civilization” at the conjunction of under-supply of, and over-demand for, potable water?

          Are reason, civility, hope, and love likely to determine the outcome?

          The Ik Tribe leads; history shows that we shall follow suit. We are not “good.”

          1. Sufferin' Succotash

            Of course we’re not “good”. We aren’t “bad” either.
            If you believe George Lakoff and Mark Johnson’s “Philosophy in the Flesh” we’re creatures whose consciousness runs largely on metaphors. Even such basic components of human awareness as “time” and “causation” manifest themselves metaphorically (as various forms of physical movement).
            Protagoras nailed it 2400 years ago–we, or rather our metaphors based ultimately on sense experience, really are the measure of all things. So it follows that we better be goshdarned careful about our metaphors, eh?
            The best example of a use of metaphors so sloppy as to verge on or even surpass incoherence is supplied by Orwell: “the jackboot is thrown into the melting pot.” Coming up with a whopper like that one may have taken some thought on the part of Orwell’s anonymous political pamphleteer. The most conceptually dysfunctional cases of metaphor abuse are the ones happening unconsciously…

          2. skippy

            @beardo, the LifeROI on that would make oils pale in comparison, not to mention, creating the most epic of bottlenecks to extract rents off.

            BTW water is recycled endlessly in a planetary system (a process conducted in – very – long – time – lines), not so much with the human one. There are compounds humans introduce which are impossible to remove or at tremendous cost. Anywho manufacturing – Ag are the biggest users and we know what that does to it.


            Skippy… Cheers big ears!

          3. F. Beard

            creating the most epic of bottlenecks to extract rents off. skippy

            Common stock as private money would largely eliminate those rents should the counterfeiting cartel ever be abolished.

            As for Mother Nature’s ability to detoxify, I quit worrying about that when I learned that bacteria can break down PCB’s and that certain life forms thrive on radioactivity and sequester it.

            There’s more going on than we know, I’d bet. The End does appear to be near but not because of resource problems. Probably Israel and Iran will bring it on per Scripture.

          4. skippy

            The private sector has zero interest in the equitable distribution of life’s necessity’s or their long term viability.

            Skippy… Water scarcity already affects every continent. Around 1.2 billion people, or almost one-fifth of the world’s population, live in areas of physical scarcity, and 500 million people are approaching this situation. Another 1.6 billion people, or almost one quarter of the world’s population, face economic water shortage (where countries lack the necessary infrastructure to take water from rivers and aquifers).

            Water scarcity is among the main problems to be faced by many societies and the World in the XXIst century. Water use has been growing at more than twice the rate of population increase in the last century, and, although there is no global water scarcity as such, an increasing number of regions are chronically short of water.

            Water scarcity is both a natural and a human-made phenomenon. There is enough freshwater on the planet for six billion people but it is distributed unevenly and too much of it is wasted, polluted and unsustainably managed.


            PS. stay away from science daily type dis-info rags, hop – scotch knowledge is rubbish.

      2. Joe Rebholz

        “To rebuild the ‘system’ to me means starting from the ‘basic needs’.
        Those are nonnegotiable.
        This is a stable basic ‘value’.”

        Yes. And, as a practical matter, a well functioning system must be such that all its parts receive all the resources they need so that they can operate well and do their part to keep the system operating well. So a well functioning global human system should assure that every individual human receives all the resources it needs to develop maximally (or at least well). This includes sufficient food, water, shelter, education, health care, opportunities to live and work with others, maximal freedom within the constraints of not harming others (non-violence and peace) and all this must be done within the constraints of the earth’s limited resources. This is possible but not within the arbitrary constraints of the present system. And of course the new system should be constructed with positive and negative feedback loops (all systems have such loops) to keep the supply of these necessities reasonably stable (as stable as we can make it).We cannot arrive at such a system all at once. We cannot destroy the present system in a revolution. The present system, however poorly, presently feeds us. We will need a directed evolution from the present system to a better one.

        And , yes after we have made some progress toward a sustainable better system maybe we can let capitalism play with unimportant things.

        1. LeonovaBalletRusse

          “every individual human” Consider three possibilities challenging your answer:

          MaleA + FemaleB produce 2 children => AB DNA Set of 4 “individual humans” consuming resources BASIC to life.

          MaleC + FemaleD produce 6 children => CD DNA Set of 8 “individual humans”

          MaleE + FemaleF + FemaleG +FemaleH FemaleI produce 10 children per DNA Set => EF DNA Set of 10 + EG DNA Set of 10 + EH DNA set of 10 + EI DNA Set of 10 => Total E DNA Sets of 42 “individual humans”

          What allotment of BASIC resources to these “individual humans”is JUST?

          When it comes to the “just” allotment of scarce and finite resources, DNA Set becomes the ISSUE. The BASIC “human” competition for resources is between “My DNA v. Your DNA.”

          The Shock Doctrine says: 1% DNA monopoly over scarce and finite resources, so that ALL 1% DNA (.01% DNA + .99% DNA) competes against ALL 99% DNA “remainder.” If scarcity ensues, then, ALL .01% DNA competes against ALL .99% DNA “remainder” for resources. And so on, according to population growth vis-a-vis the availability of scarce and finite resources.

          Via “The Shock Doctrine” the .01% + .99% Agency seek “Lebensraum” for their DNA Sets “uber alles.” Whatever “remainder” exists is what ALL 99% DNA Sets must fight one another for, with the presumption that their is NO LIMIT to DNA Sets competing for scarce and finite resources.

          The result is a life “brutal and short, red in tooth and claw.” It’s BASIC.

          This is what the “Citizens” of the French Revolution realized, when they hauled out the guillotines. They would NOT stand for 1% DNA Dynastic Monopoly of Resources needed for the survival of the 99% DNA Sets.

          History shows that the 1% become spoiled and profligate in the extreme, if permitted to do so, consuming many times their “DNA share” of scarce and finite resources required to sustain life of the 100%. WHAT NOW?

          1. LeonovaBalletRusse

            edit: NOT “that their is” BUT “that there is no LIMIT.” But you knew that.

  3. Jay

    Much of finance these days is actually automated, so a deterministic approach (using typical program outputs as the “physics”) might work to a certain extent. I can’t see semiotics working well in a market that’s >70% automated, like the stock market.

    1. ambrit

      Dear Jay;
      I see the “controllers” as being subject to the semiotic meme.
      Any system is hostage to its’ “rules of usage.” These automated trading systems were designed to accomplish definite and particular ends, ‘maximizing return” etc. Therein lies the semiotic component.
      On another front; wasn’t HALs’ problem that it was becoming sentient? A paranoid computer rates pretty high up on the AI list for me.

      1. LeonovaBalletRusse

        Aren’t owners and their programmers of HFT computers paranoid? Whose computer is closer to the “source” of trading at the speed of light? Why are “circuit breakers” required in the “free market” so that all hell doesn’t break loose, sending Mr. Market to Sheol in short order?

  4. Paul Tioxon

    Certainly money as a cultural artifact and institution has more in common with language, as it is best expressed by arithmetic and mathematics and their favored symbols, numbers. It can also been seen as the clash of 2 cultures the language of quantity with money and economics as sciences (notice financial engineering innovations), and the language of quality, the use of imprecise concepts that we can not always measure or define, but know them when we see them, such has kindness or patience. But while red may need something be “red”, we can still point to red, while we can not find one example of “1”.

  5. jennifer hill

    There is water on the moon, there are planets similar to ours, space is not a vacuum. Trying to apply what “we know” to our artifical constructs of value and exchange will come up short, because the economy, money and trade are abstract concepts that have no real tangible representation in our biological, physical world. We still don’t understand our physical world and the discovery of higgs boson and snowflakes on Mars are shattering everything the average person has been told to believe. So why do we insist that the economy is something more than another belief system created by a few to give structure to and control the humanity that lives on the planet? Because humans do that; we try to understand, we try to get certainty because these beliefs comfort us in a universe that moves and changes no matter how we try and explain it. Most people on the planet don’t care if you can equate the economy to the scientific method or biological precepts, they live on less than $2 a day. I agree that we should try to undermine this concept that the market is a rational being who is self healing and concerned about an infinite existence.

  6. tiebie66

    I somewhat agree with this view because I see money generally, and fiat money, especially, as tokens. Tokens used primarily to express one’s demand for goods and services. If the tokens are durable, they can be reused; if they more-or-less stably express a unit of demand, they also facilitate accounting.

  7. Hugh

    Water and disease are agentless. Who can you blame for what they do, the molecules, the microbes? Such descriptions remove the actor, in our case the looter, from the equation. There is nothing accidental about this. Misdirection is a standard practice of class war. There is a vast difference in expected response between describing economic events as vast and impersonal and what they are: extreme wealth inequality fueled by massive looting by and for our elites.

    “The object of money is something else — what money buys”. I think this is wrong. Money is a medium for distributing resources in a society. The author seems to be doing the same thing he accuses others of doing. What gets lost, purposefully, in discussions of money is its social function. If anyone wants to introduce something useful into the discussion of money, I would start there.

    1. F. Beard

      Money is a medium for distributing resources in a society. Hugh

      Nailed it!

      And since we have two sectors, the government and the private sector, the former based on force and the latter based on voluntary cooperation, then it follows that we need both government and private money supplies.

        1. F. Beard

          I’d blame the banks for that. They are unstable gambling institutions that hold the economy hostage because of their government enforced money monopoly.

          Also, we really can’t say we even have a private sector so long as government backed banking exists.

          1. F. Beard

            As for the banks acquiring their money monopoly, that resulted from an inadequate understanding of money.

          2. skippy

            Where do you get your history from… really? Granted the below is highly compressed history.

            In the United States the first bank was the Bank of North America, established (1781) in Philadelphia. Congress chartered the first Bank of the United States in 1791 to engage in general commercial banking and to act as the fiscal agent of the government, but did not renew its charter in 1811. A similar fate befell the second Bank of the United States, chartered in 1816 and closed in 1836.

            Prior to 1838 a bank charter could be obtained only by a specific legislative act, but in that year New York adopted the Free Banking Act, which permitted anyone to engage in banking, upon compliance with certain charter conditions. Free banking spread rapidly to other states, and from 1840 to 1863 all banking business was done by state-chartered institutions. In many Western states it degenerated into “wildcat” banking because of the laxity and abuse of state laws. Bank notes were issued against little or no security, and credit was overexpanded; depressions brought waves of bank failures. In particular, the multiplicity of state bank notes caused great confusion and loss. To correct such conditions, Congress passed (1863) the National Bank Act, which provided for a system of banks to be chartered by the federal government.

            In 1865, by granting national banks the authority to issue bank notes and by placing a prohibitive tax on state bank notes, an amendment to the act brought all banks under federal supervision. Most banks in existence did take out national charters, but some, being banks of deposit, were unaffected by the tax and continued under their state charters, thus giving rise to what is generally known as the “dual banking system.” The number of state banks expanded rapidly with the increasing use of bank checks.

            Recurrent banking panics caused by over expansion of credit, inadequate bank reserves, and inelastic currency prompted Congress in 1908 to create the National Monetary Commission to investigate the banking and currency fields and to recommend legislation. Its suggestions were embodied in the Federal Reserve Act (1913), which provided for a central banking organization, the Federal Reserve System (see also central bank).

            Skip here… Look, whether government created, backed or private the same thing happens time and time again. In addition, if company’s or corporations issued any type of writ, with the promise of convertibility or redemption, the same shite would happen. Its inevitable. This is only a slice of American history, yet, it repeat’s its self through out recorded human history.

            Skippy… have you ever considered that the problem[s are much more fundamental and how to address it from that stand point? Probably not, myopia will do that too ya.

          3. F. Beard

            if company’s or corporations issued any type of writ, with the promise of convertibility or redemption, the same shite would happen. skippy

            Agreed. But common stock is not normally redeemable! Rather than an uncertain (and basically fraudulent) claim on a liquid asset, common stock is certain, though partial, ownership of all the issuing company’s assets, liquid or no. A run is thus impossible.

          4. F. Beard

            Btw, it’s spelled “shit”. Are Americans the only ones who can properly spell English?

          5. F. Beard

            have you ever considered that the problem[s are much more fundamental and how to address it from that stand point? skippy

            I thought we could start with “Thou shalt not steal” and go from there later on.

          6. skippy

            Sorry beard, assets values can be manipulated, erroneous, pumped, fraudulently priced, etc. Runs happen when enough people become aware of the crime[s. With the way you read *common stock*, they just get stuck with the loss. Common (lesser) stock is just re-branding of already tried and failed exchange mediums. The 9/10th law thingy will always mess with peoples heads.

            Skippy… without a peruse of contractual warranty, remediation, remands and obligations, its all just wind.

          7. F. Beard

            With the way you read *common stock*, they just get stuck with the loss. skippy

            Well, remember that private monies are optional. People could use fiat for private debts too. That would likely be my personal choice UNLESS the fiat was improperly managed (by say bailing out the banks) and a good reputation private money issuer existed.

          8. skippy

            “Thou shalt not steal” – beardo.

            Funny enough, profit is – stealing – from the future and at 65 million a year in urban POP growth alone… its a veritable crime wave.

            Skippy… OK… no more Shite, try Daggy.

          9. F. Beard

            Funny enough, profit is – stealing – skippy

            No, it’s profit taking that the Bible condemns – profit is good; profit taking is bad.

            Common stock allows the profit to accrue in the quantity and value of the stock. There is no profit taking UNLESS dividends are paid (and they shouldn’t be!).

          10. F. Beard

            As Capital is profit hoarded, with the preservation of said capital, being the first rule of capital…eh. skippy

            It is our current money system that allows capital to be hoarded rather than “shared”.

            Yves said that equity financing is more expensive than debt financing. That should not be and would not be if companies did not have access to what is essentially a counterfeiting cartel that steals their workers’ purchasing power.

            It all goes back to the banks.

          11. skippy

            At its very foundational core, the process is the same, no matter what names you give it. Given time, the results are the same. The hole linguistic exorcise to describe the same out comes in different colors, is just various grades of haute couture, till, in the end… its the tranny look.

            Skippy… come on beardo, before banks, there were gawdkings and priests (both stealing the power of labor, husbands to the vines thingy) and controlling the storage silos. So your plan is to make everyone priests, with tokens in their possession, representing a piece of some questionable value in a silo? Do I get to see whats in the silo when I want? What are my rights? Anyway in a time of increasing complexity, which is causing so much trouble, why increase it exponentially.

          12. F. Beard

            At its very foundational core, the process is the same, no matter what names you give it. Given time, the results are the same. skippy

            Common stock as private money certainly allows growth but does NOT require it while usury REQUIRES exponential growth so that the compound interest can be paid. Common stock as money also “shares” wealth and power; it does not ordinarily concentrate it.


            So your plan is to make everyone priests, with tokens in their possession, representing a piece of some questionable value in a silo? skippy

            Only if they choose to be since good ole fiat would always be an option for the payment of private debts.

            Do I get to see whats in the silo when I want? What are my rights? skippy

            You would have the right to refuse to accept any money you weren’t happy with including fiat.

            Anyway in a time of increasing complexity, which is causing so much trouble, why increase it exponentially. skippy

            Fiat creation would be greatly simplified since governments should only spend their money into existence and tax some of it out of existence as needed to control price inflation. Private money creation would only be as complicated as the private sector desired.

          13. skippy

            “So your plan is to make everyone priests, with tokens in their possession, representing a piece of some questionable value in a silo? skippy

            “Only if they choose to be since good ole fiat would always be an option for the payment of private debts.” – beardo.

            Skippy… WOW… just fken WOW[!!!]… Can you say New American Century NAR – NAC economic template! Fken WOW!!!!!!!!!

          14. F. Beard

            I can say it but I don’t know what it means.

            Good nite. My contacts are bothering my eyes.

          15. skippy

            The dog ate my brain and have gone suddenly blind exit stage left excuse, please.

            Skippy… sure would like access to the IP logs and run them through an algo or two, determine the grouping of incidence thingy.

  8. Capo Regime

    Ha. If you abstract it enough and make poor decisions by oligarchs natural phenomenon like the weather or the flu nobody has to take responsibiliity. No says Dimon I am not a corrupt guy and then senator says I am not a venal stooge of wall street—its a contagion you see, nobody is to blame. Of course we helf it all when its going well so do pay us millions.

  9. jest

    You should check out Mark Taylor’s book “Confidence Games: Money and Markets in a World without Redemption”

    Not explicitly, he also makes a connection between semiotics and high finance. Only his take is this is a new phenomenon, and has led to the perversion of finance.

    Signs end up being used to distort and mask the true underlying conditions, e.g. using the ABX index as a proxy for home values.

    Then complicating matters is that financiers use nested signs, i.e. a sign which is a sign for something else. Derivatives being an obvious poster child.

    An example would be the profit extracted from a synthetic CDO, which is a sign of the ABX index, which is a sign of the value of AAA RMBS, which is a sign of the housing market. Because many bankers made good bonuses off these products and “God’s Work,” it justified the good workings of the housing market; even if they were a bit problematic. Profit became a sign of reaffirmation that one’s actions are laudable.

    That’s sort of where he was coming from. Virtual signs & virtual reality ultimately distort. It’s about the supremacy of the sign and the signified, rather than the actual and reality.

    1. lambert strether

      Sounds like the analysis is the “sugar hook.” Here’s the sting:

      Confidence Games closes with a plea for a conception of life that embraces uncertainty and insecurity as signs of the openness of the future.

      Yeah, well, it’s really the catfood can openers of the future I’m worried about just now. (“It’s all very well for you to say, Professor. Got tenure? Thought so.”)

      University of Chicago Press, I note. Not that there’s anything wrong with that.

  10. craazyman

    This post don’t make no sense. Of course non-physical, non-Newtownian energies can be contagious. Hysterias, panics, fads, fashions, delusions, religions. People imitate what they see. They don’t think in their haids and says “OK, this is logical to me therefore I will do it.”

    No. They say Monkey see, monkey doo. Contagion. Non-Newtonian contagion follow probaballistic law.

    Otherwise, I have no idea what this dude Pierce is talking about. Maybe it’s a sign language (hahahah sorry). If things are signs, then when do things stop being signs. How do you know when something is not a sign. is there a sign that lets you know when signs stop? A stop sign. ah ha!

    Of course money is a sign or a symbol. You can’t eat it like an apple or catch it like a fish. It’s all totaLLY imagination. Big chief have head feathers. Little squaw sit in tent. Big Bear hunt in woods. Why? Because they spend all day giving each other signs from their snakes. Sleep inm the head. LOL. Too funny. Wish i had another beer right nbow. But it’s just one on a Sunday.

  11. JTFaraday

    I think in the annals of weather economics– which they profess to be contesting– The Economist just went from bad (contagion) to worse (ripples).

    Contagion/ disease can be prevented/ cured, and until a rash of austerity broke out in Europe/Greece, western medicine post Black Death has striven to do so. (Hell, even during the Black Death you could make the appeal to God).

    OTOH, modern scientific man has yet to figure out how to keep the tsunamis from rippling around the Pacific.

    They can’t even manage to get people off the beach in time.

  12. Historicaecon

    And for what it’s worth, I think the best metaphor for economic activity is probably traffic pattens. Road systems are giant human systems, which allow a sort of channeled agency. The roadway’s equivalent of “supply and demand” is obvious: The traffic jam, which increases the costs (in time) of a given route. The metanym for”financialization” is equally telling. If you pave the earth (making it a more efficient roadway) have you actually increased quality of life? Hardly.

  13. M. Renee Orth

    Interesting subject, though I’m not sure we have to choose just one metaphor. Since metaphors are inherently imperfect, mixing them can be helpful.

    I wrote a bit about metaphors in economics (not finance – a whole different story). In it I cite some fascinating research by some Stanford psychologists about the power of metaphors to shape our thinking and policy choices. I link to them here …

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