The New York Times published an article yesterday about derivative traders being controlled by 6 powerful banks whose influence serves to keep out competitors and decrease the transparency of transactions. What struck me was the graphics that the article used to demonstrate both the problem and the solution for derivative trading:
The Problem: Murky Market – no transparency
The Solution: Introducing a clearinghouse for transparency and correct pricing
The second diagram demonstrates how the introduction of a vetting mechanism inserted directly at the spot of least transparency greatly increases socially valuable attributes such as transparency, true pricing, reduced risk, open sourcing, elimination of conflicts of interest, and increased sustainability, etc – many of the attributes demanded by the new generation of activists seeking their place in the discussion that they struggle to understand. Hedge funds are indeed important tools for reducing volatility if, and only if, they don’t themselves introduce new risks.
The Value Game:
The second diagram looks a great deal like The Value Game developed by The Ingenesist Project for the monetizing social currency. By introducing a leveraged asset in the middle of a series of transactions, true value of the whole transaction system can be established eliminating volatility and reducing systemic risks. The Value Game works in a manner quite similar to a hedge instrument.
The Airplane Game:
The Airplane Game deployed by the new start-up called Social Flights, for example, introduces a jet airplane transaction as a clearinghouse for the balance of the transactions in the game of door-to-door travel. When all the players put their money down on a jet flight, they convert the financial currency to social currency, the true value of the transaction can be established when compared to an alternate market such as commercial airline, driving, train, etc. – not necessarily to dollars in the bank.
Financial Currency is a derivative of social currency
It is not surprising that social currency will become a hedge instrument for financial currency in markets. After all, nothing economic can happen until people get together to build something. Nothing of any significance can be built unless people exchange social currency. Only after all of that, can it be converted into money.
As such, every broker in every market can be replaced by a Social Value Game providing intrinsic banking services. Can you see it?