As I note there is a revolution already happening which is the salvation of an economy ravaged by use of credit on an epic scale. It is a salvation because the economy is fractal in nature, it is the source of the fractal growth of the equity market.
Here is where the companies which grow to fulfillment of their financial structure exist and act. But it is the strength of the economy, it is the structure which creates all the good things.
Money flow is another part of the economy, but it is properly flow, it is meant to source power to the companies. There is no structure, an economy and a market which exists on money flow, is liable to collapse. What I mean there is support, but only as long as the flow can continue. The events leading up to the crisis were about bootstrapping money flow.
The ultimate support for it provided support only as long as it was not itself describable as a source of money. When this happened, total collapse happened. The forex market did not collapse because it is not about value it is about relative money flow being optimized, with structuring from chaos. What would stop forex is no transactions happening in the economy and no trading.
The collapse did result in the most enormous disappearance of asset wealth, but it did not wipe out bank accounts. See now why a collapse of the banking system would have been ruinous, and why the Fed did everything necessary to keep it alive.
But companies are more than a structure, they are the greatest source of money flow themselves, as the alchemy expressed in their financial statements inputs added value to the economy.
It is no accident the equity market is the creator of great fortunes in finance. By investing one is inputting into that alchemy, without having to work for the company. Day trading equities misses this, it catches more onto the input of vast sums of money and their effects.
These inputs are more like waves hitting a boat. They move it but then disappear. Investing is more like the addition of fuel to the motor, which is how it moves against the waves if those on board wish.
But forex is like inputting into this process, in a day trading time frame. Why, because you are entering minute processes, fine grained computations which make up that alchemy. Investing and the equity market is quite coarse grained, that is also its attraction, its causality is clearer.
Remember the units of forex are different from those of the equity market. These units are optimization of value differentials, that is the heart of the process which makes value in the economy. Without optimization, the boat is going nowhere. In the markets the crew cannot really guide the boat, as they do not know the direction, except in a very coarse grained kind of way.
So in the crisis, value remained ? Of course, that is exactly what is was the reassertion of the heart of the economy as assets were revalued to correct values, as the pressure from money flow collapsed.
In the moments before new events, one sometimes sees the market quite precisely indicate what happens next, that is the heart of the value computation, stripped of money flow.
To model a structure, one must mimic it in some sense. That suggest forex needs a distributed framework to work as an investment instrument. That is one is trying to input and ride the processes which compute value.
That is its attraction, one sees this, it is just they are so fine grained and so complex it is impossible to predict what happens next, one always tries to go with what the big money is trying to do, but as in equities that is not what the computation is about.
© 2011 Guy Barry - All Rights Reserved.
