The Financialization of Everything.

• Author: Daniel, Emmanuel

"The impact... on society is both profound and very simple: the worth of entire economies is now increasingly found in their financialized assets, rather than actual economic activity that generates work and value for society."

THE MOST DRAMATIC financial trend of our time has been how entire economies have gone from being valued against something as physical and tangible as the price of gold to a mere perception of the value ascribed to an ephemeral asset on any given day.

Financialization refers to the process by which the value of a real asset, such as property, a share, or even physical gold, increasingly is based on a piece of information, data, digital token, an index, or information of any kind, and no longer the asset itself. Financialization is the precursor to personalization because it reduces all kinds of financial assets to mere information that can be transmitted digitally.

In ancient times, financialization was contrived to mitigate risk, where the value of an underlying asset either could be hedged or preserved to create certainty of income for its owners by trading, hedging, or distributing that risk. At the time, the industry monitored information pertaining to ships and the cargo they carried out on the high seas. This was used to ascertain whether they were coming back with commercial cargo, the profits of which would then be shared among investors. Trading on a Lloyds List in the 1700s was as much about the financialization of information on ships as the online trading of foreign exchange derivatives is today.

The industrialization of information in the 1980s abetted the financialization of anything that could be reduced to a piece of data. Michael Bloomberg launched the terminals business in 1981 that still bears his name, riding on the advent of desktop computers in banks. Within one decade, thousands of Reuters and Bloomberg terminals were installed in banks and corporate dealing rooms worldwide and connected to each other, effectively allowing users to buy and sell information.

Over time, the financial information industry delved deeper and broader into markets. Reuters launched an equities system in 1987, followed by a commodities system in 1988, in a joint venture with the Chicago Mercantile Exchange. Today, financial information players publish a plethora of indices and benchmarks for financial markets to productize and industrialize their data. The securities industry moved away from trading in the actual underlying securities of any asset a long time ago, and now trades mostly in derivatives. According to Bloomberg, the number of actual tradable stocks in the U.S. marketplace peaked in 1995. Today, there are three times more indexed and mutual funds than there are actual shares to support them. There are numerous financialized assets, of which cryptocurrencies, nonfungible tokens, and virtual real-estates are only...