Bye Bye Brokers, Hello Blockchain Technology

The Game Stop (GME) shenanigans are another reminder of the systematic risks lurking in the financial markets. Equally important, the incident highlights how certain players prevent markets from running more efficiently. The inherent dangers and market inefficiencies are not only borne by market participants but by every citizen.

Blockchain, Block, Chain, Bitcoin

This article discusses a technological advancement, allowing financial markets to operate more efficiently. In particular, we discuss the tokenizing of assets and show how blockchain technology can make our markets and, therefore, the economy more efficient.

We thank Charlie McGarraugh and commend his ability to explain a complex topic in plain English. For more on tokenizing assets, we highly recommend listening to his recent appearance on Smarter Markets.

A Dirty Piston in Capitalism’s Engine

The United States went from a sleepy backwater colonial outpost to an economic superpower on the back of capitalism. America and western civilization show that capitalism raises living standards for all. Capitalism is not perfect, but the more a country adheres to its core tenets, rule of law, private property, competition, free markets, and freedom, the greater its benefits to all citizens.

When any of capitalism’s tenets are encumbered, it impairs the natural dynamism that fosters prosperity. Today’s brand of capitalism, dare we say corporatism, leaves much to be desired. Multi-decade trends of weakening economic growth, massive leverage, declining productivity growth, and widening financial inequality serve as evidence.

Blockchain, Bye Bye Brokers, Hello Blockchain Technology

Blockchain, Bye Bye Brokers, Hello Blockchain Technology

Financial markets are constrained, manipulated, and made more costly to transact in due to intermediaries. These players limit the benefits of capitalism to the detriment of a majority of citizens. Free markets are not as free as they can be.

The recession of 2007-2009 reminds us these problems do not just result in higher transaction costs and reduced capital flows. They also carry immense layered and hidden systematic risks that burden the entire population. Consider the fact that very few people knew what a sub-prime mortgage or CDO-squared was before the great financial crisis. Even the PhDs at the Fed underestimated those risks.

To tune up capitalism’s engine and provide more to the many, we must find a more efficient way to operate financial markets.

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