See, as a true HNer (heh..), I would like nothing more than believing that a high tech software operation that makes money and is run by nerds is a force for good.

However, I'm afraid your proof-by-analogy does not work. If you actually know what you are talking about, why not explain the current financial system clearer and with more information?

In turn I promise not to burden this discussion with a dissection of your analogy, or even my own set of analogies which would beautifully fit my current bias, and which you would surely reject outright.

Another way to describe "liquidity" is inventory risk insurance. Large investors (a term that doesn't actually mean anything) have different time frames for buying and selling their product. If a large participant has to hold onto their portfolio longer than they want this will change the "natural" price they will be willing to accept.

Market makers generally, smooth these time disparities. As long as the smoothing is cheaper than the price disparity then it is a net positive for the "real" participants. How do we determine if this is cheaper? Quite simply, the market! You can trade non-liquid products electronically. The price spread his much higher in those products.