Oct
28
2009

  The FIRE Economy

Terry notes in his blog that the FIRE economy in this country is part of our economic problems. The FIRE economy is that built around the industries of Finance, Investment, and Real Estate. In these industries, people get paid not for providing a product or a service, but for. . .nothing really. It's money for nothing, and lots of people are employed in these industries. I don't grok the nuances of it, but I think the gist is that these industries wouldn't exist if we didn't have central banks and fiat money. Terry didn't come up with this, this is an established economics thing he learned about.

I'm definitely part of the FIRE economy now. I'm sitting here, watching my weekly profits tick up and up (I'm on track to make just this month what I made Jan-Sep), and what have I done to earn anything? I haven't made anything of value and sold it to anyone, nor have I provided a useful service to anyone.

Unless you call adding liquidity to the capital markets a useful service, I think it's kind of a stretch. I sit around every morning for several hours (and lately, again in the afternoon) and read articles, chart ETF prices, and place trades. Completely useless from a global productivity standpoint. It really boggles my mind that it's this easy to make money. Money from nothing. Well, easy isn't exactly the right word. It's NOT easy to make money this way, I suspect very few people would succeed at it. But it requires very little physical effort. Not like farming, or cooking, or even getting up and going to work and pushing papers around. I could probably still trade if I were a quadriplegic, just moving the cursor around with my eyes or something.

So my gut intuition is that this can't last forever, can it? Is the government going to regulate the market so heavily that it will be impossible to earn a living off it? If that's the case, it won't stop investment, but it could certainly make it involve more effort. Instead of just trading stocks in a centralized market, investors will have to go old-school, and find actual businesses to invest in. Go out, hit the pavement, find businesses that need money, and get contracts, etc. for future profit-sharing. I'd be no good at that, too many steps are required for someone with ADD to handle and follow-through with effectively.

So I'll continue to plug away at my completely opportunistic little career as a trader, and just keep on getting as long as the getting is good. And if the FIRE economy collapses, I guess I'll have to quit my day job and just take care of William, and Terry can figure out a way to make money. He actually is very good at creating value, which is useful if we're using fiat money or not.