Posts Tagged ‘banks’
“Financialization is neither finance-nor enterprise-driven”…
The estimable Brad DeLong has observed that Marx was right: “all that is solid melts into air”…
Since 1870, worldwide, on average, according to our flawed standard measures, every thirty years about 4/5 of the economy have improved in technology and productivity by roughly 25%, at a rate of roughly 0.8% per year. And 1/5 of the economy has quintupled in technology and productivity, at a rate of about 5.4% per year. That leaves average productivity, worldwide, roughly twice what it was a generation before. And it is a different, although overlapping, share of the economy that undergoes this massive leading-sector push every generation.
And so, since 1870, we have seen successive Steampower, Applied-Science, Mass Production, Globalized Value-Chain, and now Attention Info-Bio Tech modes, with these transformations occurring faster and more completely in today’s rich countries and slower and incompletely in today’s poor countries, but with life even in poor countries being substantially transformed vis-à-vis life 150 years ago…
… For most people, a generation sees (i) some change in their roles as producers in the organization and productivity of their jobs and the pieces of the societal division of labor that they do, some change in their roles as consumers and utilizers of most of the products of the human division of labor, but about one-fifth or so of their life as consumers and utilizers of the products of the human division of labor completely upended, largely in a good way. And then there are the 1/5 of people whose jobs and whose roles as producers were caught up in the Schumpeterian creative-destruction leading-sector technology tsunami, for whom little is the same as it was thirty years before. That change is to their substantial detriment if they tried to do the old thing in the old way: their real incomes then would be only 1/4 or so of what they would have expected. But that change would have been to their substantial benefit had they found a way to successfully surf the wave.
To summarize: Since 1770, the modern economy changes by puncture, not glide. Every thirty years these days, a sector explodes—lifting productivity, reorganizing firms, and scrambling career ladders. Roughly four-fifths inch forward, while one-fifth quintuples and redefines the frontier. Those leading sectors—steam, mass production, information—rebuild institutions and stress politics as they march. Most people experience partial gains in consumption and workflow; the unlucky fifth face brutal displacement unless they pivot fast. Past waves forged industry, mass production, suburbia, microelectronics; each remapped the social order, often painfully. Average living standards rise, but the distribution is jagged, and the politics volatile. Today’s leading edge runs through data centers and cognitive work: prompts, context engineering, evaluation, and synthesis. The liberal arts—long buffered—now sit at ground zero. Survival means translation: turn judgment, clarity, and taste into leverage over machines and markets, while rebuilding public capacity to manage the turbulence…
– “All That Is Solid Melts into Air”: Since 1870, Roughly One-Fifth of the Economy Is Transformed Every Thirty Years,” from @delong.social
And how’s that going? Two dispatches from the front, on separate but fundamentally-related phenomena emerging in our current “puncture.” First, Luke Goldstein on the way in which a great many major corporations — from airlines to social media platforms — now aspire to become unregulated banks. As he explains, “bankification” today accounts for the highest profit margins in the US economy, crippling productive capacity and setting the stage for the next crash…
The US economy is turning into one giant bank.
Starbucks holds nearly $2 billion of customers’ money in its rewards program. That’s more than the total deposits managed by 85 percent of chartered banks, making the coffee chain one of the biggest financial institutions in the country.
Conversely, Capital One, one of the world’s top banks, now operates its own cafes on city street corners.
Airlines are now little more than flying banks, given that they make more money from selling frequent-flyer points to credit card companies than they do flying passengers.
More Americans than ever are in debt to their nearby grocery store due to predatory “buy now, pay later” loans offered during checkout.
As you’re wheeled into an emergency medical procedure, the nurse may ask if you’d prefer to pay on a deferred-payment loan plan, an increasingly common way to finance health care expenses.
And if you can’t pay your rent on time, it could soon become common for your apartment building owner to lend you the money, putting you in debt to your landlord.
These are snapshots of the new wave of financialization sweeping across the country, where the lines between finance and commerce are being blurred.
Upward of 40 percent of Americans now pay for basic items like groceries and health care using borrowed money — and this excludes credit cards. A third of younger Americans hold their savings on nonbank tech platforms like Venmo, and industries from retail to transportation derive anywhere from 14 percent to half of their profits from partnerships with credit card companies.
While this new type of financialization takes many different forms, the endgame is the same: Most major corporations now aspire to become unregulated banks, opening up new avenues to make even more money hand over fist. Banks operating credit cards are the highest-profit-margin enterprises in the economy. Every company wants a share of the loot, amassed from high fees and low overhead costs.
This development has been supercharged by the Silicon Valley investor class, under the Orwellian term “embedded finance.” Others call it “bankification.”
The peddlers of embedded finance promise a world of “frictionless transactions,” providing consumers efficiency and convenience by integrating financial and nonfinancial services.
But these new profit streams come with a range of potential harms….
– “Everything Is Becoming a Bank” from @jacobinmagazin.bsky.social
Next, Ted Gioia on the rise of our gambling culture. He begins by recounting the grimy details of the recent gambling bust that rocked professional basketball (includsing the roles of ESPN and the NBA itself… though…)..
… It’s not just sports. Two weeks before the FBI arrests, the New York Stock Exchange invested $2 billion in the Polymarket betting operation. As Gordan Gekko says in the movie Wall Street: “It’s all about bucks, kid.”
Does the NYSE now count as the sixth family running gambling in New York?
No, it’s not that simple. There are lots of gambling businesses in New York, starting with the government. The NY State Lottery brings in more cash than all the Mafia families combined. So the NYSE is a johnny-come-lately to the gaming tables, like country rubes visiting the Statue of Liberty…
[Gioia unpacks the “ideas”seven rules of casino design and management” of casino design expert Bill Friedman (“a former gambling addict who wrote a very influential (and expensive) book on casino design”]
… Of course, the real insidious process is happening online, where every big web platform is imitating a gambling casino. And they rake in gangsta profits bigger than any gangsta has ever made.
How bad is it? Consider this fact: Among the eight largest companies in the world, at least half of them promote addiction with screen interfaces that mimic slot machines…
– “Why Is Everything Turning into a Casino?” from @tedgioia.bsky.social
The last word, which applies to both pieces, from Gioia:
Of course, none of this demands your participation. You can leave the casino at any moment—or never enter in the first place. Even if gambling is addictive, most people refuse the bait.
That’s especially true right now. Las Vegas tourism has fallen dramatically. And when you interview consumers, they will tell you why—they are upset at the casinos. The gambling business has become too exploitative and manipulative.
So people just walk away.
The exact same thing is starting to happen with social media. And for the same reason—folks are fed up with the apps. Many stop using them, and brag about it to their friends. So the trend of walking away feeds on itself…
… Maybe businesses need to find a different role model than a casino. It’s not hard to think of a few examples.
So let me close with a wild idea.
Perhaps they can design web apps to serve people—instead of controlling, manipulating, and surveilling them. After all, many businesses once thrived with that simple formula. It’s not too late to return to that practice…
By way of understanding “casino design and management” techniques at work online, see also “Catalog of Dark Patterns, “a variety of dark pattern examples, sorted by category, to better understand deceptive [consumer experience] design practices,” from Dark Patterns.
And by way of context: “The Invisible Economic Crisis,” (Louis Hyman interviewed in TNR), “It Is Trump’s Casino Economy Now. You’ll Probably Lose,” from Kyla Scanlon. and Scanlon’s follow-up piece in her newsletter: “How Bible Sales and Chipotle Explain the Economy.”
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As we just say no, we might recall that it was on this date in 1834 that the first mention of the card game poker was published, a reference to an account by English actor Joseph Cowell, who reported that the game was played in New Orleans and on Mississippi River boats (as recounted in Jonathan H. Green‘s book, An Exposure of the Arts and Miseries of Gambling.
Poker itself originated in the late 18th century, and had probably spread throughout the Mississippi River region by 1800. It was played in a variety of forms, with 52 cards, and included both straight poker and stud. 20 card poker (the variety referenced by Cowell) was a variant for two players. (It is a common English practice to reduce the deck in card games when there are fewer players).
“You cannot escape the responsibility of tomorrow by evading it today”*…
… But you might be able to make a buck on it.
We humans are prone to illusions– ideological enthusiasms, avoidance, et al.– that don’t just allow, but encourage us to avoid hard truths. If there’s one sector in which that’s less true, it’s likely finance– where the altogether unemotional logic of profit-making prevails. But as Corbin Hiar illustrates, that can accrue as finding ways to profit from, rather than avoid, the problems that are brewing…
Top Wall Street institutions are preparing for a severe future of global warming that blows past the temperature limits agreed to by more than 190 nations a decade ago, industry documents show.
The big banks’ acknowledgment that the world is likely to fail at preventing warming of more than 2 degrees Celsius above preindustrial levels is spelled out in obscure reports for clients, investors and trade association members. Most were published after the reelection of President Donald Trump, who is seeking to repeal federal policies that support clean energy while turbocharging the production of oil, gas and coal — the main sources of global warming.
The recent reports — from Morgan Stanley, JPMorgan Chase and the Institute of International Finance — show that Wall Street has determined the temperature goal is effectively dead and describe how top financial institutions plan to continue operating profitably as temperatures and damages soar.
“We now expect a 3°C world,” Morgan Stanley analysts wrote earlier this month, citing “recent setbacks to global decarbonization efforts.”
The stunning conclusion indicates that the bank believes the planet is hurtling toward a future in which severe droughts and harvest failures become widespread, sea-level rise is measured in feet rather than inches and tropical regions experience episodes of extreme heat and humidity for weeks at a time that would bring deadly risks to people who work outdoors.
The global Paris Agreement, from which the U.S. is withdrawing under Trump, aims to limit average temperature increases to well below 2 degrees Celsius. Scientists have warned that permanently exceeding 1.5 degrees — a threshold the world breached for the first time last year — could lead to increasingly severe climate impacts, such as the demise of coral reef ecosystems that hundreds of millions of people rely on for food and storm surge protection.
Morgan Stanley’s climate forecast was tucked into a mundane research report on the future of air conditioning stocks, which it provided to clients on March 17. A 3 degree warming scenario, the analysts determined, could more than double the growth rate of the $235 billion cooling market every year, from 3 percent to 7 percent until 2030.
“The political environment has changed, so some of them are conforming to that,” Gautam Jain, a former investment banker who is now a senior research scholar at Columbia University, said of Wall Street’s increasingly dire climate projections. “But mostly it is a rational business decision.”
The new warming estimates come as heat-trapping gases continue to rise globally and as international commitments to limit the burning of oil, gas and coal that’s responsible for the bulk of emissions have stalled. Meanwhile, megabanks like Wells Fargo are backsliding on their previous climate pledges and exiting from the Net-Zero Banking Alliance, a United Nations-backed group that encouraged members to slash their emissions in line with the Paris Agreement.
Morgan Stanley, which in October watered down its climate-related lending targets, declined to comment.
Betting on potentially catastrophic global warming is both an acknowledgment of the current emissions trajectory and a politically savvy move in the second Trump era, according to Jain.
“Nobody wants to be seen as going against” the administration’s pro-fossil-fuel energy policy, he said. “These banks are businesses, so they have to look at the risk that they have in their portfolio and the opportunities that they see in the most likely environment.”…
Making hay in the havoc: “Big Banks Quietly Prepare for Catastrophic Warming,” from @corbinhiar.bsky.social and @eenews.bsky.social via @sciam.bsky.social.
Related: “Reinsurers: placing an economic price on climate change.”
* Abraham Lincoln
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As we sweat it out, we might spare a thought for Hugh Robert Mill; he died on this date in 1950. A geographer (President of the Geographical Association) and meteorologist (President of the Royal Meteorological Society), he was influential in the maturation of geography and cartography– and relevantly to this post, in the development of meteorology as a science.
“Money doesn’t talk, it swears”*…
In 1858, the United States was an industrializing nation with a banking system stuck in frontier times… Heated battles over ‘the money question’ came to dominate the country’s politics, but no matter how unsatisfied the people, any solution that tended toward centralization was, due to the prevailing prejudice, off the table.
America was a monetary Babel with thousands of currencies; each state regulated its own banks and they collectively provided the country’s money. Officially, America was on a hard-money basis, but the amount of gold in circulation was insignificant…
And therein hangs a terrific tale, “Printing Money,” an excerpt from America’s Bank: The Epic Struggle to Create the Federal Reserve in the always worthy Delancey Street; read it here.
* Bob Dylan
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As we bite our coins, we might recall that it was on this date in 1982 that money market deposit accounts were first offered by banks and S&Ls across the U.S. Pioneered in the early 70s by brokerage houses, the accounts were a way around the Regulation Q prohibition on interest payments n demand accounts.
From the Department of Fantasy Fulfillment…
Patrick Combs actually did something that most of us have only imagined doing: he deposited one of the phony, “not negotiable” checks included in the junkmail that swells our recycling… And the check cleared.
As he explains in the Financial Times,
It was a cheque, made out in my name, for $95,093.35 and it came in a junk-mail letter from a get-rich-quick company. It was worthless, meant only as a financial tease, a lip-licking come-on. “This is how much money you could soon be making.” What it was never meant for was deposit. But that’s exactly what made the thought of depositing it so irresistibly funny. What could possibly be funnier than depositing a perfectly ridiculous, obviously false, fake cheque? (Did I mention it had “non-negotiable” clearly written on it?) So, as a joke, I deposited the fake cheque into my bank’s ATM. I felt like a million bucks doing so. I’d never had so much fun at my bank. Come to think of it, I’d never had any fun at my bank until the moment I endorsed the back of this “cheque” with a smiley face and slipped the Monopoly-like money into the mouth of the hungry ATM. For the first time ever, I walked away from my bank laughing.What I expected to happen next was a short phone call from my bank. Or a letter informing me of what I already knew, that the cheque I deposited was not real. Admittedly, I also hoped for a compliment on my refined sense of humour. A “Mr Combs, what you deposited was not real but very funny, especially considering your real bank account balance history” (an account always bouncing into overdraft).
But the call or the letter never came and I forgot about my joke. Then, five days later, I returned to withdraw some cash from the ATM, and noticed a much higher than usual bank balance. $95,093.35 higher! The bank had credited my account with the fake, false, stupid cheque!…
Vicariously live the good life at the FT, or here— or see Patrick’s one-man show, “Man 1, Bank 0.”
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As we reconsider those sweepstakes mailings, we might spare a carefully-regulated thought for Edmond “According to…” Hoyle; he died on this date in 1769. An expert on whist– all the rage in the 18th Century– Hoyle tutored members of high society on the game. He converted his notes into a books, which became a best seller, then moved on to other games (backgammon, piquet, chess, and quadrille). Hoyle never actually wrote an encyclopedic rule book. But as his name had become synonymous with canonical reference, “Hoyle’s Rules of Games” became a standard title (as “Webster’s” later did in the lexicographical sphere), and “according to Hoyle” passed into use as a testament to its subject’s adherence to rules or concordance with highest authority.
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