The Hoax of Modern Finance: Part 2 – Indicators, Terminology and Noise
In today’s economy, the majority of decisions relating to money are based in modern financial principles. It is therefore essential that those same principles have foundation in reality. Unfortunately, numerous indicators and terminology are used to give an erroneous impression of the legitimacy of modern finance. In this article, the hoax of modern finance will be investigated, looking at indicators, terminology and the noise that these two create.
Indicators are one of the most important metrics used in modern financial management. They are often promoted as the “one-stop shop” for making decisions and are used by different organizations to measure performance, profitability and trends. Despite the supposed accuracy of these indicators, they are based in largely unverifiable theory and are prone to errors and misinterpretation. In fact, many indicators are extremely reactive, leading to decisions made after the fact rather than in anticipation of changes in the market.
This is exacerbated by the use of terminology in modern finance. Terms such as “monetary policy” and “basis points” make financial documents sound more sophisticated and attractive to investors. However, these terms are often misused and misunderstood to disguise the fact that modern financial management is based around anecdotal evidence and speculation, rather than hard facts.
The noise created by these indicators and terms is what prevents people from recognizing the hoax of modern finance. Even when evidence is presented that modern finance could be flawed, the attention is quickly diverted by the terminology and noise created by the indicators. This noise serves to confuse or hide the reality and truth of the situation.
At the end of the day, it is essential to recognize the hoax of modern finance. Essentially, modern finance is based around largely unverifiable theory and speculation, meaning that it should not be trusted as the primary determinant for making financial decisions. As such, those making financial decisions must take into account all indicators, terminology and noise, and ensure that decisions are being made not solely based on gleaning from modern financial principles.