With the banks ruling the world, and the machines as good as ruling the banks, just how close are we to another major financial crash?What I got from the film is that the new financial products that capitalists gamble with are based on assumptions about the future which have their roots in the most basic of all capitalist assumptions--economic growth. Capitalism requires growth to exist, hence people who work for capitalists such as mathematicians create models and mathematics with growth built into them. Inevitably these assumptions are wrong because reality based on people is constantly changing. Investments, or the bets, based on these assumptions are huge, the payoffs huge, but also the consequences for economic destruction are huge most of which are born by ordinary people.
In this brilliant VPRO documentary, some of the world’s leading “quants” — that is, people who specialize in the application of mathematical and statistical methods to financial and risk management problems – voice their fears about the financial industry’s almost complete dependence on mathematical models, many of them deeply flawed.
The bust part of these cycles are happening at an increasing rate. Capitalists, who incidentally are a ruling class, use their control of the state and central banks to provide stimulus in the form of low interest rates to create more money (debts to nations) and another cycle of big payoffs is created for them. (For an interesting commentary on the role of the Fed, read this piece by James Kunstler.)
I would also argue that because their assumptions, on which their logarithms are based, are motivated by the basic capitalist requirement of growth, they are disastrously wrong given the fact that growth can no longer be sustained given the finite limits of the planet. So, we must choose between two options: change the system or experience a nightmarish dystopia and probably extinction.
View the fascinating video and see what you think.