as an interested reader but relative layman on security issues, your posts on those topics appear very knowledgeable. On econ and business however, you are on my turf. I haven't got time for a full breakdown, but here's a few points:
1) "In general manufacturing adds real value / wealth by adding utility as do some service industries. However other service industries such as finance / banking adds monetary value / financial wealth by inflation of price without adding utility (usually by putting in place cost increasing non utility enhancing processes)."
Firstly, many, many industries "[put] in place cost increasing non utility enhancing processes."
e.g. 1 when motor manufacturers design vehicles so they need specialist diagnostic kits that approved dealers have but independent mechanics don't, to try to drive the latter out of business, is that not a "cost increasing non utility enhancing process"? What about when Microsoft changes the format of Word every 1/2 hour like it used to?
e.g. 2 What do you think all those lobbyists do in Parliament? If you think they're not trying to buy legislation that undermines their competition, I have some seafront property in Warwickshire/Kansas to sell you.
Secondly, this type of pro-manufacturing anti-service industry thinking is responsible for many of the economic woes we currently face. Here's an example of why: Say you're a manufacturer. You make a product that takes you an hour and costs you $10. The market will bear a selling price of $30 so your max income is $20/hr profit x 40hrs/wk = $800. Now let's say that instead of adding 'real value' by manufacturing it yourself, you find a supplier who can make them for $18. That's $8 an hour MORE than it costs you to make it yourself. Why would you ever use them? A: Because it frees up your time. Now you can build a website and sell thousands of them, while still only putting in the same 40 hours. $30-$18 = $12 profit each x 000s = a lot more than the $800 you'd get if you made it yourself. Further, if you could design a better one or find a cheaper supplier you'd make even more, except of course, now you're no longer a manufacturer, you're a ...a ...a oh no! ...a service industry. Think about it Clive. Why don't you make the bricks for your house or your own bath towels or each part for your car? The answer is, because you've specialised and you're a lot better off because of it. The trick is to save while you're employed and keep your skills up to date so that if you find yourself shoe-ing horses when the car's been invented you have a cushion while you retrain.
2) "However parts of this overall process does not add real [value] for instance the process of transportation. That is energy/work is added to move the iron ore etc without transforming it. A COST IS ADDED THAT INCREASES THE MONETARY VALUE BUT NOT THE REAL VALUE."
'Monetary value'? 'Real value'? What's the difference? A pound in your pocket is a pound in your pocket whether you earned it working down a mine or selling computer security advice. It's all 'real value'.This isn't government we're talking about. Fraud and management laxity aside, if 'it' didn't add real value, it wouldn't get done. If you can sell your steel for $50 a tonne in Manchester or transport it to Liverpool for $10 a tonne and sell it there for $65, which are you going to do?
3) "At a cursory glance futures trading appears to be a zero sum game (for every winner there is a loser) but it actually is not. Invariably overall the winners are the traders selling and the losers are the industries buying."
"But does the process of futures actually add stability or just cost?"
A) If it just adds cost, why would any industry trade with the traders?
B) What do you mean by 'winners'? Any company that sells at a loss for too long will eventually go out of business, both futures traders or 'industries buying'.
C) You are completely missing the enabling functions of the futures market. Consider orange juice. You're setting up in business and you can be a farmer or a weather forecaster/statistician/trader. You plump for being a farmer. You estimate the next year's weather, how much you should plant etc and off you go. You'd like a tractor/fertilizer etc., but as it might be a bad year, you need to keep the cash on reserve to see you through the winter, so your productivity is less than it could be. At the end of the year, you sell your whole crop for a price of X. Futures traders starve.
As it happens, you bump into one of these starving traders at the market. You start talking and you mention you predict next year will be the same as this year and thus that you're income will again be X. It turns out that by foregoing learning to be a farmer, he is a worse farmer than you but was able to become a better weather forecaster/statistician/trader. He thinks it will be a better year and so the two of you discuss an arrangement. He offers a contract to pay X +Y next autumn/fall for the same tonnage you produced this year. What do you do? With a guaranteed contract, you can spend that spare cash on the tractor and save those poor bones of yours AND you'll have Y extra cash AND, with a guaranteed income, you won't starve if it's a bad year so you can buy that tractor/fertilizer and plant even more. Now remember, this offer he's made you is entirely voluntary. You have no obligation to take it whatsoever, but are you really going to turn down a deal like that? And if the trader has no use for your produce himself but rather contracts with someone else to deliver it to them at the end of the year, does that make any difference to you? You'll still get your X + Y. Think what's happened here. You made more money, the trader made more money, the tractor manufacturer made more money, more orange juice was produced so consumers were better off. Really, Clive, the only people who think that's a bad idea have read too much Guardian and not enough Adam Smith.
MBA boy (and once again, NOT a banker/trader!)