The world’s complex financial landscape

Are we in a cyclical or structural point of inflection in what is happening in financial markets? The cyclical view is that in the short-term we are going up or down a stock market bubble. The structural view is that there are deep structural issues that are changing contextually the whole environment of financial markets, driven by real factors such as globalization (or de-globalization), technology, demographics, climate change and confusing local and geopolitics.

- ANDREW SHENG

The simple answer is that we are not in an either-or situation, but undergoing complex, multidimensional simultaneous, interactive systems change. Henry Kissinger was right to identify that Americans think there is a unique or optimal solution to everything, whereas Chinese know from deep history that for every solution, multiple problems emerge. We are undergoing complex systems transformation, in which subsystems interact with each other to change the whole, which then affects the parts. This is a more biological way of analysis, very different from the pure physics view of money, finance and the real economy.

Lest we forget, finance has always been a derivative of the real economy. The Austrian/British philosopher Karl Popper (1902-1994) saw reality and human perception in Three Worlds, the first physical, the second mental and the derivative Third World which is the outcome of complex human mental (or intellectual) interaction with Nature (physical or First World) to form evolving language, science, culture and civilization.

Eastern civilization always conceived a Fourth World of spirituality, which modern science is reluctant to accept since the world of unknowns cannot be quantified and measured. Money straddles the Second and Third World, since money is a mental derivative of physical goods, such as cowrie shells, gold, silver or bronze coins, being derivatives of physical things that humans value. The beauty of money, which the emergence of cybercurrency has enlightened us, is that liabilities (mental derivative of assets) can be treated as assets through the fashionable term of “tokenization”.