The Future of Futures
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The Future of Futures

The Time of Money in Financing and Society

Elena Esposito

This book reconstructs the dynamics of economics, beginning explicitly with the role and the relevance of time: money uses the future in order to generate present wealth. Financial markets sell and buy risk, thereby binding the future. Elena Esposito explains that complex risk management techniques of structured finance produce new and uncontrolled risks because they use a simplified idea of the future, failing to account for how the future reacts to attempts at controlling it. During the recent financial crisis, the future had already been used (through securitizations, derivatives and other tools) to the extent that we had many futures, but no open future available.
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Chapter 8: Derivatives

Elena Esposito


Derivative contracts, which were the focus of financial innovation over the past decades, are strange and very abstract tools that do not refer to goods or assets directly, but to changes in the value of goods and assets (those they ‘derive’ from) (section 1). They do not refer to the present but to a future date for which they have already decided some of the conditions. One will buy or sell (or have the possibility to buy or sell) something at a given price, even if still unaware of what the situation or prices will be at that later date. Derivatives are needed because we are unaware of these things, in so far as they refer to what people expect or fear from the future, and deal with the resulting uncertainty, an uncertainty that is bought and sold with great freedom with respect to goods and becomes the real object of exchange. In derivative markets, one buys and sells risk, and one can make substantial profits (section 2). Risk is indeed a risky object, and far more so than the goods that ‘normal’ trading deals with. It produces a ‘leverage’ that multiplies profits and damages, because it allows one to ‘free’ oneself from a reference to the world. When risking on risk, one only has to deal with uncertainty and its trends, and not with the goods themselves. In this way, one can even earn a great deal when the market goes bad or lose when the market is good....

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