Piketty’s Wealth Tax Won’t Hurt Investment

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Yves here. Note that Amar Bhide comes to conclusions on Piketty similar to Cameron Murray’s, aka Rumplestatksin, from a very different starting point. From Bhide’s new article in Quartz:

Partisans argue that financial systems that channel savings into risky investments are an essential feature of an advanced economy: compare, they say, the US economy with China’s or Russia’s. The US financial system is certainly more sophisticated, but it has long been so. And, the expansion of finance in recent decades doesn’t seem to have turbo-charged the economy; as financiers have channeled more funds into risky investments, growth in overall incomes and productivity has if anything flagged, while the compensation of financiers, never paltry, has unmistakably jumped…

The US Federal Reserve’s failure to control inflation in the 1970s eroded investors’ faith in bonds and bank deposits while pension rules and regulators encouraged a shift to stocks and other higher risk assets. Until 1968, for example, public funds in California and 15 other states did not own any stocks. The state laws prohibiting stock purchases were then repealed. Rules intended to ensure that pension plans were properly funded encouraged state and other pensions to buy stocks that are thought to have greater upside than bonds. Now, 65% of public funds are invested in stocks, real estate and other alternative investments.

Securities laws enacted during the New Deal and their vigorous enforcement have made buying and trading stocks respectable. Previously and for much of America’s history, “the public reaction to the stock market was one of general distrust.” Shady activities were rampant through the nineteenth century, and in the early twentieth century, the stock market was still “a shadow world in which only the initiated could find their way.”

The Fed, established to prevent collapses in old-fashioned bank loans, has also become a stalwart supporter of stocks. Chairman Alan Greenspan created the impression that the Fed would do everything it could prevent stock prices from falling.

Government mortgage guarantees and purchases of mortgage-backed securities have turned millions of the not particularly well off into leveraged speculators in real estate. Earlier, bank regulators frowned upon mortgage lending, so until 1930 banks extended mortgages to borrowers who could pay off their loans in three years or less, while demanding 50% down payments.

These interventions may have been well-intentioned efforts to bring everyone into the miraculous transformation of good economic growth into great wealth. But far from spreading the riches around, the government has bestowed great fortunes on a few who would otherwise merely have been prosperous. And promoting Wall Street’s self-serving fantasies has jeopardized the legitimacy of a capitalist system that provides great reward for great contribution.

By Rumplestatskin, a professional economist with a background in property development, environmental economics research and economic regulation. Follow him on Twitter @rumplestatskin. Cross posted from MacroBusiness

As I explained last week, saving by an individual is usually achieved by buying monopoly assets from others, forgoing consumption in order to capture a future flow of income for oneself.

This usual way to save is merely a transfer of assets whose value equals the difference between income and spending. Someone gets richer, others poorer. But importantly, the rate of saving of an individual, when understood in this manner, bears no relation to investment in the quantity of new capital goods in the economy generally and can’t be related to the rate of growth of the economy.

Transfers don’t matter for investment, and most savings are transfers.

Yet it is very common to hear that rich individuals, because less of their spending goes towards consumption items, are able to save more, leading to greater levels of investment in new capital goods and higher future productive capacity.

While many economists profess a degree of caution in such analysis when challenged, the very notion that saving at an individual level equates to a proportional level of investment in new capital at a national (or global) level is embedded in the economic way of thinking.

Here’s Tyler Cowen making the point implicitly:

Stocks of wealth stimulated invention by liberating creators from the immediate demands of the marketplace and allowing them to explore their fancies, enriching generations to come.

And here’s Karen Dynan et al.

…active saving corresponds to the supply of loanable funds for new investment and therefore may be helpful in gauging the effect of a redistribution of income on economic growth.

But since saving at an individual level is almost solely about buying monopoly assets from others, this claim simply cannot be made. Saving at an individual level is nothing more than a transfer of ownership of existing wealth.

When I buy some Apple shares in order to save, I merely buy from the current owner, changing absolutely nothing in terms of Apple’s intentions to invest in new production machinery and equipment.

If saving is as I described, the fact that the wealthy have a lower propensity to consume, and therefore a higher marginal propensity to save, merely implies increasing wealth inequality, as assets accumulate in the hands of the already wealthy; a trickle-up effect if you will.

This is particularly relevant to current debates about how to address inequality. Would a wealth tax on the rich decrease overall investment? Not at all. The tax would be a transfer of ownership of resources, just like the saving of the rich is a transfer of assets and unrelated to investment in new capital equipment.

It is possible under very specific circumstances for an individual’s savings to exactly match investment. For example, if I buy a specific financial instrument that pools my funds with others to finance construction (but not land purchase) of a new building. But that is a rare case that proves the general point that there is no proportional matching of saving and investment at an individual level.

While I have said nothing that contradicts economic theory, I do find it frightening that experts in the field have such contrasting views on the matter.

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  1. tiebie66

    I do find it frightening!
    “It is possible under very specific circumstances for an individual’s savings to exactly match investment…. But that is a rare case that proves the general point that there is no proportional matching of saving and investment at an individual level.”
    “Saving at an individual level is nothing more than a transfer of ownership of existing wealth.”
    It seems that the paradox of thrift can only exist under rare cases (if at all). This must be problematic for Keynesians as (i) savings cannot lead to a drop in aggregate demand – it amounts to a ‘portfolio’ or expenditure rebalancing, and (ii) collective thrift now appears directly (rather than inversely) related to individual thrift.

    1. craazyboy

      Yes, the paradox of thrift can only happen if you bury your cash in a coffee can in the back yard. Even if you just keep it in a checking account, then something happens to it – the money multiplier thing, the bank money thing, the leverage thing, or banks use it to settle up on all the bounced checks they write to the Fed and everywhere else – depending on your favorite way of looking at things.

  2. Ben Johannson

    This must be problematic for Keynesians as (i) savings cannot lead to a drop in aggregate demand

    Keynes makes clear in his Treatise on Money that saving does not necessarily occur in equilibrium with investment; if incentives to buy capital equipment are less than those to simply spend less income an economic slump can result. At the time he attributed this state of affairs to a return on capital less than that set within the banking system, but by the time of the General Theory he had advanced to the idea of liquidity preference in explaining the disequilibrium.

  3. Dan Kervick

    When I buy some Apple shares in order to save, I merely buy from the current owner, changing absolutely nothing in terms of Apple’s intentions to invest in new production machinery and equipment.

    So company’s don’t raise money for investment by selling stock?

    1. Ben Johannson

      I think it questionable to call buying stock “saving” at all. He seems to be a bit confused on terminology.

      1. Cameron Murray

        Genuinely curious, what do you understand as the definition of saving?
        (I am the author of the post btw)

        In economics is it usually regarded merely as any income not used for consumption, which includes all purchases of assets (and Apple stock).

        It also includes money in the bank, and in rare cases (as I said) the funding of new capital investment.

        1. Ben Johannson

          The purpose of a stock issuance is to raise capital for productive purpose. Given the increased risk and desire for a return associated with stock purchase I think it is more correctly classified as investment.

          Saving itself is in the Keynesian sense a preference for a stock of money captured from cash flow (income not spent, etc.). Liquidity and safety are the goals rather than growth of principal. So a Treasury, a government backed security, a mattress or jar full of snakes would be saving.

        2. Trinity River

          “What do you understand as the definition of saving?”
          I understand saving to mean the amt of money that individuals do not use for consumption. Of that amount, some is used for true investment whether I do it myself or whether it is done by others when I put it in the bank or buy stocks and bonds.
          Currently the term investments does not only include investment in productive assets, but also includes speculation on the future value of productive assets. In 2010 I remember watching C-Span when Congress was having hearings about the price of gasoline. These hearings indicated that 60% of the price of gasoline was due to speculation in the price of oil reserves. So much of “investments” now is not increasing our productive capacity. These changes came about as the result of deregulation. My concern for our economy is that this type of investment is drowning out the productive investment that increases the standard of living for the majority of our population.

      2. diptherio

        My understanding is that people with retirement savings generally have that savings in a portfolio of stocks and bonds. So stock purchase is a form of saving, at least from one perspective.

        1. Ben Johannson

          There are a lot of ways to look at it and more than one can be right, I think. I draw the line by risk and purpose: if you want to hedge against uncertainty by holding back a portion of your income, that is saving. If your goal is taking on risk to grow your principal then you are investing.

          So a person who is relatively young and wanting to plan for retirement will invest most of her funds to gain interest. As she grows older she will shift more of them into savings where they would have greater security and (hopefully) get a sufficient return to avoid being eaten by inflation.

      3. Mel

        I was thinking the same. For me, “saving” meant directing money away from current spending. After that I would decide what to do with the money I’d saved. I wouldn’t buy AAPL in order to save, but I might save in order to buy AAPL.
        But if you’re talking about the anonymous economy, that definition gets tricky. If I lend my saved money to somebody who goes on to spend it, then in the large picture it didn’t get saved. The saved money that stays saved is money that stays on balance sheets. So could a tax on wealth decrease overall investment? Sure. If a tax on wealth meant that balance sheet assets got sold into a market that was weaker than everybody had thought, then investment, in dollar terms, could go down. If everybody was marking to market, it could go down a lot. Which would say nasty things about the quality of the enterprises supported by that investment.
        There’s a line in Amar Bhide’s paper that seems to trip up by this definition of saving. ISTR a line about savings being very weak in this economy. Given record DJIA levels and behemoths of financial juggernauts lumbering around, I don’t see how that could be true.

    2. craazyboy

      That’s actually the unusual case. Companies get cash from selling IPO’s, or doing a secondary offering, or sometimes they have “authorized stock” on the books that they haven’t sold yet and will slip out some of it into the market as market conditions allow. Then tech companies seem to come up with newly printed stock to fund employee compensation plans, and investors put up with that because they like tech company growth so much. But trading stock in the market usually has no cash going to the company.

      Not to say CEOs are happier with a high stock price – job security, they own a lot, makes hostile takeovers more expensive, and they can do stock swap financed takeovers, of course.

      1. diptherio

        And even in the case where the company is selling new stock issues, who’s to say that the proceeds are going to be invested (how much of facebook’s IPO proceeds got plowed back into the business, for instance)?

        1. craazyboy

          In their case they recently blew an ungodly amount of it on some silly acquisition.

    3. MyLessThanPrimeBeef

      Theory is that if you (many of you, I guess) buy Apple, it’s stock price will go up.

      Then someone with lots of Apple shares will be more willing to pay more for star athletes or a brand new hockey/baseball/football/basketball franchise.

      He or she might also spend more on caviar on the next political fund raiser.

    4. Yves Smith Post author

      The overwhelming majority of stock trading, even before HFT made it vastly worse, is in issued shares, not in fundraising.

      Moreover, the most important sources of funds for companies to make investments is (in order) retained earnings, borrowing, and sales of equity.

      And public companies in aggregate, starting in about 2003, have been net savers. They have NOT been investing.

      So the stock market is even more of a casino and less about funding growth than it ever has been historically (save maybe the very late 1920s, with highly levered trusts of trusts of trusts).

    1. Moneta

      Interestingly, there are way more comments for MMT posts than for oil posts… so you know where the delusion lies…

      What I know is that anything I make costs much more than if I buy it from a store, even if I peg my labor and tool costs at 0 and buy my materials at deep discounts. For me it is obvious that resources and energy are currently being subsidized by someone somewhere and that externalities abound.

      1. John Merryman

        Like all good ideas with conceptual irregularities, capitalism is playing out to a state of reductio ad adsurdum. From being a method for making the economic process more efficient, its function has now become the production of capital, ie, notational value, to the detriment of all else. Money is a contract, not a commodity. We can manufacture these promises of value to infinity, if we ignore the validity of the other side of the equation. One person’s asset is another’s obligation and the way it has been configured, the obligation is largely public, while the asset is largely private.
        Money functions as the circulatory system of society. Much as government is its central nervous system. We outgrew private government, aka. monarchy, when those managing lost sight of their larger social function and became too costly for the benefits they provided. Now we are finding the limits of an effectively private monetary system. When the value of the money is based on public debt, then rewards will have to accrue to the public, or the system blows up eventually.

        1. MikeNY

          I really like your first two sentences here: they strike me as a correct diagnosis of how things went off the rails. A good thought, kudos.

          1. John Merryman

            Thanks. It’s a bit like those statues on Easter Island. That single minded focus can lead us off the cliff.

      2. John Merryman

        Also oil is one of those assets being wasted in order to create as much notational wealth as possible.

  4. Dan Kervick

    One thing that needs to be mentioned in this context is Mariana Mazzucato’s concept of the entrepreneurial state. She argues that our societies were more innovative, and growth more robus, when governments played a more important role in “mission-oriented” investment: the highest risk projects most fundamental to the overall national development strategy, often in the area of science & technology. I wrote about this before:

    Mazzucato’s central message is that standard accounts of the economic role of the state are incomplete. These accounts focus on the provision of public goods and the state’s role in compensating for negative externalities and other market failures. But Mazzucato believes economists and the public need a better understanding of the role of states in driving economic innovation. She argues that government spending has been most effective when that spending is directed towards large missions, and that missions such as putting a man on the moon or tackling climate change require strong government intervention. Mazzucato builds on her account of mission-oriented investment to explain how to develop public-private partnerships that are symbiotic rather than parasitic.

    Mazzucato also discusses the problems of predation and value extraction, but resists the idea that the problem consists entirely in a contrast between a bloated and extractive financial sector, on the one hand, and a productive real economy on the other. Private sector firms in the real economy can be just as extractive as financial sector firms, if the former use earnings to overpay management and send large profits to shareholders instead of investing them in long-term, research driven projects. Mazzucato argues that if we don’t have a good story about value creation, we can’t understand the processes of rent extraction and predatory behavior, and that the full story of value creation in the modern world requires more attention to the high-risk, long-term investment missions that have been carried out by governments.


    I have also written about the role of high levels of government consumption and gross investment in driving and building the post-WWII prosperity of the United States. In thinking about alll of this, one thing we need to ask is who will end up owning the new fixed capital assets and technologies that are produced.

    A global tax on capital certainly could reduce, in some degree, the investment capicity of private capital. But it allows the public to play a larger role in investment by increasing the public’s capacity to spend on both investment and consumption within the bounds of price stability. And what we need now is a larger public role.

    Right now there are various schemes in play for the public to play more of a role in subsidizing “green” investment though green banks, etc. But what these plans are really all about is subsidizing the next big round of private capital accumulation. The state is going to fund private investment in new green infrastructure, and take one-time interest payments as its reward. But in the end, wealthy corporations in the private sector will own these new infrastructure assets, and the rest of us will be paying rents to them for their use forever after. We really do need to reduce capital accumulation at the top levels of the private wealth pyramid, and to encourage wealth accumulutation at the bottom, whether in the form of increased private wealth held by individual households of modest means, or in the form of publicly owned capital held by all in common. That’s a potential feature of the wealth tax, not a bug.

  5. Moneta

    There will be point in my life where I will not be able to work. So if I live 20 years without working, I will need 20 years of money for food and other necessities. In a perfect world, every year during my working years, I would only consume a percentage of what I purchased and store the difference. However, a lot of what I will need is not storable. So I have to find a way to store it. And in today’s environment, if could, I would. But with today’s hyper-specialization and planned obsolescence, it’s impossible. That’s when the hard assets and investments come into play.

    If you want everyone to spend and consume 100% of their income annually, then you have to be ready to transfer a good chunk of your income to pay for those who can’t work because your system forced them to consume all their income during their working years. The thing is that taxes have been cut for the last couple of decades while the percentage of retirees is growing. Whether a chunk is taken off your paycheck or new money is printed and only sent to the retired, it’s still a tax.

    Obviously, when the number of dependents to the working population grows, there will be less consumption for the worker. And as a growing percentage of the population works to produce energy, there will be diminishing amount of income going towards discretionary spending.

    It’s pretty clear that we have built ourselves a system that is not sustainable energetically. And right now, everyone is still waiting for a recovery as if this downturn was only a blip.

    1. jrs

      Though the ways of saving that exist now aren’t really doing the job (401ks that become 201ks in every economic crash and bank accounts paying zero interest), so there is a decent argument for handling it far more with a social safety net. But yea society needs some way for people to be provided for in their old age, if none whatsoever is provided people will resort to what they always have: having more children (only with an overpopulated planet, that’s really not so desirable).

  6. financial matters

    I’m getting the impression that Joe Firestone may be well ahead of his time. But as there is much frustration with the current state of affairs he has put forward some interesting ‘radical’ ideas for change.

    First is the Platinum coin. It basically just realizes that the Fed/Treasury act as a single agent at the bidding of Congress and that the public purse should be used for the public good. In one stroke taking away the austerity myth and realizing that we can fund many worthwhile social and investment programs.

    He also offers up a suggestion for more representative government by trying to empower individuals over special interest groups. http://correntewire.com/a_meta_layer_for_restoring_democracy_and_open_society_part_three_the_ivcs

    He offers a well thought out synthesis of MMT where he combines the descriptive and policy aspects into a plan as to how a better understanding of money creation (aka platinum coin) and financial stocks and flows (sectoral balances) can be used for the pubic good especially under a system of more representative government. http://www.correntewire.com/the_job_guarantee_and_the_mmt_core_part_fifteen_components_of_the_knowledge_claim_network

    This ‘public good’ aspect seems to be his litmus test and would include single payer medical care and affordable education and would not include privatization of public assets.

  7. Moneta

    Obviously, when the number of dependents to the working population grows, there will be less consumption for the worker. And as a growing percentage of the population works to produce energy, there will be diminishing amount of income going towards discretionary spending.
    Unless we become more productive… which is hard to believe because:
    1. younger generation is moving farther away from work
    2. less workers per dependent with more demands vs. a few decades ago.
    3. growing percentage will be in energy generation
    4. growing malinvestment due to moral hazard.
    5. growing student debt leading to less creativity and risk taking

    But maybe manna will fall from the sky….

    1. allcoppedout

      The technology cavalry will ride in to save us, no doubt on android horses. They will carry with them The Machine (TM) that will do all the work now done by lawyers, economists and accountants (the 80s prediction of embodied expert knowledge I worked on). Moneta would not need to work in this robot heaven, though issues remain on how she will be fed and housed to do her needle-point. Keep, of course, the cartoon she links to in mind! No doubt we can BIG-up a solution?

      I share Dan’s concerns about ‘just setting ourselves up for the next accumulation’. I want radical, practical change – a world for my grandson and the kids who play outside my house to live decent lives in. First person is important here as I have no full articulation. In Moneta’s common sense view, we save for the time we can’t work any more. I operate in this view – another three year’s work to pay off the mortgage, have money to fund grandson to some point he can be self-sufficient (unlikely) and so on. Yet I believe none of this theory-in-use, other than it is forced on me because alternatives are silent in practice – we can only talk of them. Money in this view is clearly a lot to do with self-protection. This is the standard view I hear in as far as others will share of their personal views. It is, perhaps, the household view of old Greek economics. And one can hear it as honest expression of practical circumstances as here, or hideous rot from a ‘no society Thatcherite’.

      What we need in old age or as the kids growing outside (as litter and noise louts when I fail to love them) is the built-capacity to provide for us and means to access, maintain and improve this. Currently, we operate ‘believing’ rent-extraction parasites are essential in this, and given they are manipulating a religious control fraud, it’s not surprising to hear them claiming to do ‘god’s work’. Common sense leads me to live in Moneta’s scheme. Something else leads me to believe this is little to do with what might be worth being as human, to live other than as a functionary of this system. I favour positive money experiments, much as we generally use experiment as part of theory development in science. Money without debt (though not without obligation) or personal accumulation as money, but rather in capacity and development the parasite can’t rent out. The cunning of this parasite is such that after taking its two-twenty PE fees and billing for more not in the intention of parties to the contract (so taking 25% plus of the spoils), it wants me to be grateful. We can’t vote for positive money experiments and instead must ask the parasite for permission to produce the means of its destruction.

  8. Dan Kervick

    “Now let’s go to Piketty’s model which defines output and savings in a non-standard way (net of depreciation) but when written in the standard way Piketty’s saving assumption is that I=dK + s(Y-dK). What this means is that people look around and they see a bunch of potholes and before consuming or doing anything else they fill the potholes, that’s dK. (If you have driven around the United States recently you may already be questioning Piketty’s assumption.) After the potholes have been filled people save in addition a constant proportion of the remaining output, s(Y-dk), where s is now the Piketty savings rate.”

    Could you point to the place in Piketty’s text where it is made clear that this is Piketty’s model?

  9. impermanence

    Worrying about people saving or spending is like worrying about how many breaths people take. All systems absorb/equilibrate on a continuous basis. It is only distribution that matters as long as the economic system is producing sufficient labor-value.

    1. Moneta

      Actually if my neighbor is filling his pantry and replacing all his home essentials with long lasting product/renos instead of going on trips, there is less chance that he comes knocking at my door when times are tough.

      1. impermanence

        If that neighbor comes knocking at your door [under those circumstances], then you will know what to do. And after all, isn’t sharing your productive efforts that which makes life with living?

    2. Dan Kervick

      Yeah, but the equilibrium can be a crappy equilibrium. If a society consumes too much of its output, it stagnates. If it consumes all of its output, it gets poorer.

  10. allcoppedout

    There is now an executive summary of Pikety’s tome by AD Thibeault (£6 – Amazon). Pikety’s view on social science is that it informs democratic debate rather than transform society, and can help correct what I’d call daft Idols and subject all positions to constant critical scrutiny. I fell out in the early pages because he described work in inequality operates a a few well-established facts together with a wide variety of purely theoretical assumptions. This is a typical academic ploy – claiming new ground. It is made over and over and is rarely true. This said, I could find little not to agree with in the book and realised when Dan shared some of his reading I was prompted to an unnecessarily hostile personal read (partly on boredom). The argument he makes is sound, though I can’t believe we could not find much better sources of ‘flesh and blood data’ – people experience inequality and one can walk amongst it. In this sense, I think social science makes many false assumptions on data through habit formation. For me, the book still resides in the functionalist tradition of elite control, though the author is clearly concerned this control should be democratic and is not.

    On the idea that the ‘ideal type’ tax suggestions would not hurt investment, I see many economic papers looking at consequences that are essentially spreadsheets. If this, then that, but this, leading to … if someone gives me £100 quid I’ll go to the pub, yet can’t because the dogs need a walk … £12 billion here will do that there … it all looks very clever until someone able to withstand the boredom or without the polite manners of the nodding donkey yes-person points out ‘you missed this’. One gets database control working in manufacturing (and such would work in finance) – but this is not even Piketty’s aim.

    We would expect hot money to run from wealth taxes, much as we’ve seen cash and gold flee such as Argentina. Piketty is aware of this. This money can only run if we let it by leaving offshore and the other thieving systems in place. And let’s face it, we hardly get needed investment now. And if we move to positive money just what is the investment capability of ‘other money’? From pot-hole to sea energy projects, we could invest with positive money and see the carpet-baggers off. With a system that apportioned after the advent of positive money, money as we have it might disappear as a convention. What we are not free of in this debate are the embedded ideologies of our current money habits.

    1. Moneta

      I find that many people here are way too theoretical and forget to immerse themselves in the nitty-gritty of every day life or what happens down there in the trenches. They get all tangled up in their convoluted logic limited by heuristics.

      For example, I can just imagine the French enjoying their wonderful geography and resources with even a few French philosophers trying to figure out how to turn metal into gold when the Vikings invaded them. They surely didn’t see that one coming!

      The Vikings probably maximized what they could do with their own land and bored with its limitations set out to fnd some adventure. They seized the opportunity to get more of what nature could not give them. They probably did not even feel any remorse since in those day it was probably obvious that the distribution of resources was so unfair that what you had to do was go out there and fight for more.

      Today, we are so disconnected from nature, that we tend to think that all countries without resources could pick themselves up by their bootstraps and just start producing added value stuff if they would just stop being lazy. Of course, here in the West wee need to believe this so as not to feel guilty when enjoying our loot.

      1. allcoppedout

        My guess from teaching is we teach (wrongly) that personal opinion is inappropriate. I can’t see how you could be wrong in the day-job-keeping-wolfie-from-the-door context, which seems to match my experience and what others tell me of theirs. Contexts do change though. We might ask what technical or theoretical language is – in the 60s Labov and others suspected much of it was just habitual regurgitation that meets chattering class contexts like university. Piketty says all economics is based on assumptions (as we find the subjective in accounting). In change we may carry assumptions from now, right or wrong, into a future in which they have become irrelevant. In common sense we learn (or some of us do) to be flexible and agile in context. My sense is that economic debate is somehow its own context and this is a hostile one to flesh and blood data.

  11. MyLessThanPrimeBeef

    “These interventions may have been well-intentioned efforts to bring everyone into the miraculous transformation of good economic growth into great wealth. But far from spreading the riches around, the government has bestowed great fortunes on a few who would otherwise merely have been prosperous.”

    It’s the same old question: Incompetency or intentional?

  12. MyLessThanPrimeBeef

    ‘Securities laws enacted during the New Deal and their vigorous enforcement have made buying and trading stocks respectable. Previously and for much of America’s history, “the public reaction to the stock market was one of general distrust.” Shady activities were rampant through the nineteenth century, and in the early twentieth century, the stock market was still “a shadow world in which only the initiated could find their way.”’

    1. Our nation became a great nation, as late as the early 20th century, without much help from the stock market? Why did we give up such a good deal?

    2. Never one to waste an opportunity, the stock market completely recovered, and more, from its Great Crash in 1929, after which Americans should have distrusted it even more. That’s great propaganda, sorry, great marketing!!! All your genius corporations, pay attention and learn!!!

  13. allcoppedout

    Back in the day when money was large rocks Beefy, our job was to hack them to shape and push them up hill and down dale to the exchange point. I hence claim Stonehenge as the world’s first bank. Back when they were useful, banks doubled as predictors of solar solstice. Probably not quite right, yet in 2-20 plus scams they have produced a system less efficient that our Ancient Order of Rockpushers.

    1. MyLessThanPrimeBeef

      That’s why people are out of shape. We’ve stopped pushing rock (solid) money.

      Today, about 30% of us worldwide are obese…per Marketwatch.

      1. skippy

        Out of shape, that would be industrialized food and the perception of solid money exchanged for its weight on the plate. See advertizing ratchet effect over 50 years. After all the years of posting links and unpacking, its great to see the – individual based bias meme – is impervious to any factual encounter.

        skippy – 2-20 plus scams are based on the same kind of esoteric ideology.

        1. MyLessThanPrimeBeef

          Rock hacking and pushing helps most people stay in shape.

          There are exceptions.

    2. Alejandro

      “yet in 2-20 plus scams they have produced a system less efficient that our Ancient Order of Rockpushers.”

      …that’s cause they think Sisyphus was the first banker and they’re still using his model.

  14. Jim Shannon

    “Partisans argue that financial systems that channel savings into risky investments are an essential feature of an advanced economy:….”
    Capitalists never argue the truth, governments channel savings into the hands of CentaMillionaire$ and Billionaire$ and it is done through a corrupted TAX CODE, and all the economic risk of corruption always and everywhere is directly paid by the consumer, living paycheck to paycheck, and paying for that corruption!
    The TAX CODE is the problem and has always been the means by which wealth is transferred to those who control governments. The United States is clearly controlled by the CentaMillionaire$ and Billionaire$, a fact you continue to ignore!

  15. Scot Griffin

    We need to be careful here.

    Buying equity shares in publicly-traded companies, with few exceptions, is neither an “investment” nor “savings.” Your are not buying “wealth,” you are betting. Specifically, you are betting the current owner of the shares that the stock price will continue to appreciate beyond the current value of that bet.

    Clearly, public offerings directly from a company that actually capitalize it constitute “investment,” but how many initial public offerings actually do that when so many of the shares that are sold to the public existed pre-IPO?

    The share price you pay for a company stock on an exchange does not reflect the company’s current value but expectations of the ability of the company (and, therefore, the stock price) to grow faster than inflation. That’s a bet. Pure and simple.

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