Ali’s blog

Mostly quant stuff with occasional digressions

Virtual oil and the new casino economy

Posted by alifinmath on January 14, 2008

Nice piece by Pfaff:

The oil exchange was transformed from a real business that bought and sold oil to be delivered to refineries and put to use in the world economy, into a gambling house in which a barrel of oil was no more or less than a casino chip.

People talk about recent years as ones in which business and governments have functioned in terms of a virtual world of symbol, signification, dissimulation and exploitation which has only nominal connection with reality — until, of course a time comes for reality to present its accounts.

The world of finance has always been loosely tethered to the real world of humans, animals, and material objects. But that tethering has become ever more tenuous over the last two decades or so, with the explosion of financial engineering. Of course, the real world makes an unwelcome intrusion from time to time (as the mortgage mess makes abundantly clear), and this intrusion is the only thing that distinguishes the fantasy world of finance from a fantasy game like Second Life and World of Warcraft.

“Hyperreality” as a term was coined by one of my favorite French writers — Jean Baudrillard. An introduction can be found in this wikipedia entry. A more cerebral exegesis is here. Here’s another succinct explanation. In fact there are books on the impact of postmodernity (which in some sense subsumes the idea of hyperreality) on books, movies, politics, and social relationships. But none (to my knowledge) on one of the most hyperreal phenomenon around — the loony world of finance capital, compared to which Lewis Carroll’s Wonderland is a model of down-to-earth sanity.

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