False Economies are Based on Arbitrage - the Sleight of Hand Myth of Hedging.

I was fortunate enough to have obtained a science degree before I got an MBA and learned about arbitrage. Something about arbitrage just didn’t make sense to me. Otherwise I might have bought into this win-lose proposition that business use to hedge their bets and thought it made sense. Basically arbitrage is a form of financial speculation whereby you find a resource that is under priced and then buy it as fast as you can and resell it as fast as you can for the real market price or higher, thus making a quick profit. Business use it to hedge their risky bets; to take risk off the table so they say. But in doing so obviously someone (the someone who had underpriced their resource) loses. But for business, especially Conservative or Republican oriented businesses, where a dog-eat-dog mentality prevails, this sleight of hand is fine. In fact it’s ideal because it minimizes your risk at someone else’s expense. An excuse used for arbitrage is that it determines the real price of a commodity. Again the hidden hand of arbitrage reveals all. Hocus pocus. It’s magic. Let’s not really look too closely at it because it works for this and those in power - the wealthy 1%. In fact arbitrage kills capitalism. 



Perhaps that’s why Conservatives do not like facts or science.

There used to be a commercial by Smith Barney which stated that: "We make money the old-fashioned way. We earn it."  That’s no longer broadcast and for a reason.  Banks and hedge funds don’t want to crow about how they make money. They make money at someone else’s expense with the belief that preying off ignorance is acceptable. Thus the present global Capitalistic system that employs arbitrage and acts like a leech on society.

Bold business people take genuine risk to get ahead by producing innovative real products. There should be a repugnance with those that use arbitrage, a financial tool to gain wealth and reduce risk. It represents the difference between an investor that produces a material product and a speculator who increases their wealth at someone else’s expense. Employing a form of commercial barbarism such as arbitrage is immoral and counterproductive. It’s a sign of the times that so many people accept it as a normal business practice. Just because you can do it doesn’t mean you should.  

True science, not economics that employs arbitrage, teaches us that in a closed system conservation of energy exists.  You can’t create something from nothing. When you create wealth employing arbitrage you’re really making someone else weaker or poorer.  It’s a false world economy. Certainly global business today using arbitrage has found more victims to prey upon.

Arbitrage doesn’t support the common good. We should treat it like gambling and tax the hell out of it. Tax each transaction that allows arbitrage to warp and pervert our economic system. Stop financial institutes from dealing in arbitrage or else we will continue to suffer through the busted economy we have now.