Abstract:
Finance is associated with monetary support of projects that includes some form of compensation above the principle. This is the aspect of finance that is unsustainable in practice. It is in essence borrowing from the future; however the expectation of repayment tends to be a great expectation. The expectation of a return on a venture is required to have an expectation of a return on the above the principle compensation; in order to achieve economy. This isn’t likely to be the case; and the result is almost always inflated markets that result in serious and even severe financial crises.
Derivatives
Derivatives are an indirect financial incentive to promote economically viable products and services. Products and services that are likely to be substantially useful in the economy are generally good candidates for promotion. These are likely to produce an economic return; and thus promoting them has potential to have favorable effects on the health of the economy. Derivatives themselves however are an aspect of modern economics that has consistently been a hindrance to economy. They are incentives that are above the principle. Since the principle itself is the basis of economy; and derivatives interact with the principle, they disrupt economy. This is an economic observation that has thousands of years of precedent.
Interest:
The founding purpose of an economic system is efficient and effective distribution of resources among the populous. Where interest accrues, economy itself is hindered. Tokens are used not only as a liquid currency for trade. They are also used as a metric for measuring the economic value of products and services. Interest above the principle may have value in the economic model; but this isn’t to say that the economic model itself is coherent. Interest is a return; however the interest is required to produce a return itself, in the interest of economy. This however isn’t the case; and thus interest tends to result in aggregation of token wealth. Banking does however offset this to a degree. Storage of accounts is rewarded with interest as well; for the privilege of investing the stored tokens. This redistributes some of the tokens back to the general populous. This type of economic consideration could have wide spread, favorable, financial impact; however it is undone to a large degree in investing.
Securities:
Securities also include the expectation of compensation above the principle. They are tempered by the outcomes with respect to actual returns. It’s the resulting economic returns in the venture itself that determines the value of the security. This strongly and directly ties the value of securities to the value of the products and services that they are promoting in practice. Though this aspect of securities is impressively clever, they still tend to inflate markets high above the economic principle. They also have a tendency to produce many unfavorable phenomena in the economic system.
* Aggregation of Wealth
Securities aggregate wealth away from the economic principle; thus defeating their economic purpose to a significant degree. This is because they have the ulterior purpose of maximizing financial growth in the economy itself. Venture Capitalism is of course the financial benefactor of the aggregation for a time.
* Anti-Competition
In a Smithian sense, competition is favorable for a market place. In that sense, this means that the competition is sustained. This doesn’t however tend to be the case where business models are incoherently or pathologically competitive. This not only results in the reduction of competition, but also the reduction of the complexity that stabilizes the economy.
* Centralization
Anti-competition centralizes the economic structure by means of displacing and absorbing other businesses. This reduces contingencies in the economic system and even produces many singular points of failure.
* Eventual Destabilization
The unfavorable outcomes listed above tend to destabilize economic systems. These are the aspects that produce the Crisis Cycle by means of extreme flux.
Closing:
Sustainability appears to be a rather wide gradient. Some form of finance has existed for thousands of years; and that could be considered a pretty good run. This however doesn’t impact our prospects for the future. With crises coming more infrequently, stability is more on the average mind; as of late. Unfortunately, the probable amount of reform is proportional to the loss of established complexity. It’s much easier to create incremental change through emerging markets, than it is to patch it into existing ones; and fundamental change is more likely with collapse. A positive form of opportunism may be a pivotal strategy for needed change.