The Great Divergence

[Jester]

No. Large inequality might lead to problems, or be a symptom of problems, but I don't see how it would be a problem in itself. The same goes for pyramid schemes.

But this is silly. It's like saying that heart attacks don't kill people, only lack of oxygen to the brain does. Or that lack of oxygen to the brain doesn't kill people, only brain cell death does. If there is a phenomenon that leads causally and directly to serious problems (pyramid schemes!), then it's just pointless nitpicking to say it's not the schemes that cause the problems. By that kind of logic, nothing causes anything. Things would be just "symptoms" of other things.

I don't really care who was first to use the word properly. I only mentioned arbitrage as one of the mechanisms that can induce autonomic growth of phantom capital, and used Wiki to get more information on it. I understand this issue is important to you, as a student of Economic History, but unless you want to imply that 'academic' arbitrage is what's in use, and that it could never induce this autonomic growth, it is beside the point, imo.

What is "phantom capital"? Even the most faulty arbitrage models are methods of finding prices, and on the basis of those prices, making trades. That means buying and selling things, even if those things are debts, options, futures, etc. Those things have specific meanings traceable back to the bread and butter commodities, even if their relationship is somewhat abstract. There is no "phantom" here - actual value is involved, however much it may stand at arm's length. Starting up the process with "no capital" involves shorting, and shorting involves credit - a type of capital.

As I said before: Buying something at the current price on a given market, and selling later at the same market for a higher then-current price does not require arbitrage, by definition. Academic or otherwise.

Arbitrage is not about selling something *later*, nor did I ever say it was. That's a different process - moving commodities over time. Arbitrage is about taking a gap between a known buying and selling price, and making a profit from closing it. Unless you have a crystal ball, you can't know prices in the future, and so "arbitrage" becomes risky - that is, not arbitrage at all.

-Jester