> Traders cannot make a profit if they don't manipulate the price.
Is that supposed to be obvious? It seems very not-obvious to me: e.g., if a trader has no ability at all to manipulate the price, but is able to predict future prices better than anyone else can, then they can make a shedload of money by doing it. (The market will respond to their trades, which I suppose is a kind of manipulation, but that reduces their ability to profit.)
Maybe it's true in practice that no one can actually make money by predicting future price movements better than other people do, and that the only way to succeed is market manipulation. If so, it would be nice to see some evidence.
(There are other options besides "win by manipulating markets" and "win by being good at predicting on account of being extra-smart": for instance, "win by being good at predicting by means of illegal insider trading". That has ethical problems of its own, but they're very different problems from those of market manipulation.)
If the market bets on future grain price increases and makes grain more expensive before the bad weather materializes then sure, that's bad for people trying to buy grain. (Though presumably it's good for farmers.) But that same process of prediction, at least if it works -- which presumably it does, somewhat, else no one would be trying to do it -- also means that once the bad weather does materialize the prices will be lower than they otherwise would have been, because the market can predict that the weather won't always be bad just as well as it can predict that the weather will be bad one day. So, at least when the market is doing what it's meant to, the highest grain prices get reduced and the lowest ones get increased. It's not obvious that that's bad for those not-even-in-the-game people.
(The market will make mistakes, sometimes big ones. In that case, grain may get super-expensive and people will suffer or even die. That's very bad. But it's not specifically a finance problem. Grain can get super-expensive because of mistakes made by farmers or meteorologists, too.)
> Financial trade is just people profiting from people who are worse off to begin with.
There's truth in that. But -- ignoring actual market manipulation, which I appreciate you regard as a major activity of the finance industry -- when someone makes a profit out of your being worse off, they make you better off in the process. Suppose some guy on Wall Street figures out that X is going to get more expensive. You own X but haven't figured it out because you don't have Wall Street's insider knowledge or supercomputers or whatever. So you sell X to Wall Street Guy, and X gets more expensive, and Wall Street Guy makes a profit that you missed out on. Sad. But Wall Street Guy didn't force you to make that trade! Presumably you sold X because you didn't want it any more, or you needed the money. Without Wall Street Guy in the picture, you'd have sold it anyway, and got (very slightly) less for it. So, sure, Wall Street Guy is better off, and you're sad that you missed out -- but you were always going to miss out, and you are a tiny bit better off because Wall Street Guy was there bidding against other people to buy X from you.
I dunno; maybe in practice Wall Street Guy has to do a load of much shadier stuff than merely predicting how the price of X is going to change, and maybe that ends up hurting you. Maybe in practice Wall Street Guy's attempts to react quickly to new information destabilizes things more than his ability to react quickly stabilizes them. But these seem like complicated questions whose answers need a deep examination of the world's financial systems, rather than pointing to a few specific cases where bad things happened and claiming that "traders can't make a profit if they don't manipulate the price".
Is that supposed to be obvious? It seems very not-obvious to me: e.g., if a trader has no ability at all to manipulate the price, but is able to predict future prices better than anyone else can, then they can make a shedload of money by doing it. (The market will respond to their trades, which I suppose is a kind of manipulation, but that reduces their ability to profit.)
Maybe it's true in practice that no one can actually make money by predicting future price movements better than other people do, and that the only way to succeed is market manipulation. If so, it would be nice to see some evidence.
(There are other options besides "win by manipulating markets" and "win by being good at predicting on account of being extra-smart": for instance, "win by being good at predicting by means of illegal insider trading". That has ethical problems of its own, but they're very different problems from those of market manipulation.)
If the market bets on future grain price increases and makes grain more expensive before the bad weather materializes then sure, that's bad for people trying to buy grain. (Though presumably it's good for farmers.) But that same process of prediction, at least if it works -- which presumably it does, somewhat, else no one would be trying to do it -- also means that once the bad weather does materialize the prices will be lower than they otherwise would have been, because the market can predict that the weather won't always be bad just as well as it can predict that the weather will be bad one day. So, at least when the market is doing what it's meant to, the highest grain prices get reduced and the lowest ones get increased. It's not obvious that that's bad for those not-even-in-the-game people.
(The market will make mistakes, sometimes big ones. In that case, grain may get super-expensive and people will suffer or even die. That's very bad. But it's not specifically a finance problem. Grain can get super-expensive because of mistakes made by farmers or meteorologists, too.)
> Financial trade is just people profiting from people who are worse off to begin with.
There's truth in that. But -- ignoring actual market manipulation, which I appreciate you regard as a major activity of the finance industry -- when someone makes a profit out of your being worse off, they make you better off in the process. Suppose some guy on Wall Street figures out that X is going to get more expensive. You own X but haven't figured it out because you don't have Wall Street's insider knowledge or supercomputers or whatever. So you sell X to Wall Street Guy, and X gets more expensive, and Wall Street Guy makes a profit that you missed out on. Sad. But Wall Street Guy didn't force you to make that trade! Presumably you sold X because you didn't want it any more, or you needed the money. Without Wall Street Guy in the picture, you'd have sold it anyway, and got (very slightly) less for it. So, sure, Wall Street Guy is better off, and you're sad that you missed out -- but you were always going to miss out, and you are a tiny bit better off because Wall Street Guy was there bidding against other people to buy X from you.
I dunno; maybe in practice Wall Street Guy has to do a load of much shadier stuff than merely predicting how the price of X is going to change, and maybe that ends up hurting you. Maybe in practice Wall Street Guy's attempts to react quickly to new information destabilizes things more than his ability to react quickly stabilizes them. But these seem like complicated questions whose answers need a deep examination of the world's financial systems, rather than pointing to a few specific cases where bad things happened and claiming that "traders can't make a profit if they don't manipulate the price".