On Oct 24, 2007, at 9:50 AM, Robert Wrubel wrote:
> Doug quote Schumpeter:
> ""It is one of the most characteristic features of
> the financial side of capitalist evolution so to
> 'mobilize' all, even the longest, maturities as to
> make any committment to a promise of future balances
> amenable to being in turn financed by any sort of
> funds and especially by funds available for a short
> time, even overnight, only."
>
> Could you express this in less technical language,
> Doug, or as representing a more general tendency? Is
> it comparable to buying options -- betting on someone
> else's bet? Or is it a case of reckless greed -- the
> lure of profit competing with a rational calculation
> of risk? The thing described seems self-defeating this
> way -- capitalist financial managers second-guessing
> themselves -- which does not seem part of a "core of
> the capitalist process."
It's about turning up the speed, of making capital turn a profit as quickly as possible, and maximizing liquidity, so you can get out in a hurry. No one - well, almost no one - wants to hold a 30-year asset and just accept regular interest payments! Slow, dull. I haven't seen any recent stats, but the last I saw, probably in the mid-90s, the average holding period for a 30-year U.S. Treasury bond was 30 days.
Doug