The most dangerous time since the Civil War

[Kinser79]

(01-14-2018, 11:57 PM)Galen Wrote:

(01-13-2018, 09:09 AM)Kinser79 Wrote:

(01-13-2018, 04:21 AM)Galen Wrote: Nixon closing the gold window in 1971 was and never has been acknowledged as a default but it was.  The Boomers here were alive and probably had and still have no idea what it all meant.  In fact, the law fixing the price of gold at about $40 per oz is still on the books but the market feels rather differently about it.  It looks like China is introducing a yuan-gold backed oil futures contract which may do the job ending the dollar hegemony since redeeming the contracts in gold takes trust in the yuan out of the equation.

A failure to understand what Nixon did with closing the gold window is not limited to Boomers.  By and large I think most people not versed in economic theory fail to understand what he did.  Indeed it is possible that Nixon himself didn't understand what he was doing.  In my view Nixon made two very grave mistakes...1.  He closed the gold window, 2.  he made tapes of his skullduggery in the West Wing.  Neither are excusable in my view.  And I like Nixon, though that could be because his immediate predecessor was warmongering racist, and the two who followed him were utter morons.

The Boomers were there when Nixon closed the gold window and never did figure out what it means.  Most of the Millies don't even know that it happened and so expecting them to understand about an event they don't know about is unreasonable.  I find the Boomer willful ignorance to be more contemptible.

Nixon probably did understand that he was preventing an immediate dollar crisis.  It is unlikely that he thought through the long term implications of initiating the petrodollar.  Many people are mystified by why the 28 pages of the 9/11 report were classified and why the US doesn't never seemed to care about Saudi government funding of terrorism.  Those of us with an actual understanding of the economics involved are not the least bit surprised.

As for Nixon's successors, it is true that they were idiots.  Ford was simply a placeholder and that was all that anyone at that time could be.  Carter was a well-intentioned idiot but at least his brother was quite amusing at the time.

I agree that expecting Millies to understand an event that they probably don't even realize happend is unreasonable.  That said, Boomer willful ignorance is par for the course.  In general my experience with that generation is that if they decide that they don't want to understand something, they will never understand it or even recognize it.  It doesn't matter if you explain it to them as if they were five years old.

As an example my mother is absolutely convinced that Donald Trump is a racist.  He is such a big racist that he bought a golf club and opened it up for the first time ever to both Jews and Blacks.  On the other hand my mother is convinced that HRC is not racist though she's been repeatedly reported to have called black staffers Nigger(s) repeatedly.  Then again, she also refuses to understand that to the DNC black people are just another voting block to be bribed into voting for them at the expense of the public purse.

I think Nixon thought that backing the dollar in something other than gold would free the government to spend liberally on social programs and the military.  While I have said that I like Nixon as a president, I am under no illusion that he was anything but a New Deal Big Government Liberal--even if he had an R after his name.  Reagan was similar, as were both Bushes.

But then again you're also talking to someone who wants to repeal the 16th and 17th  Amendments to the constitution and abolish the welfare state on the federal level.  (States of course should be free to spend their money as they please and if that means New York or California wants to have a "war on poverty" well more power to them.)

[Actually I'd also like to repeal 20th amendment.  Revert voting rights to men who either own real property or have an income of 20K per year.  My thinking is that in order to get a vote, you need skin in the game and women can't be drafted, and the destitute don't own anything that can be taxed.  But then again according to Boomer liberals I'm an evil Uncle Tom.]

I don't really fault Ford for being clueless.  Greatness was thrust on a mediocre man.  At least he pardoned Nixon and ended the Watergate scandal or it would have been a cloud over the White House for the rest of his adminsitration and probably much of Carter's and set a really really bad precedent to boot.

As for Carter, he was probably well meaning but ultimately unfit for the times and circumstances.  Instead of speaking of malaise he needed to be cheerleader in chief.  Billy though, yeah he was amusing, and at least he was an adult when the Press-titutes attacked the President's family unlike now when they constantly bring up Barron Trump looking bored at state functions or playing with one of those fidget thingys on Airforce One.  (Personally I don't think he's autistic or whatever.  I think Barron Trump's problem is he's 10 and finds the whole being the First Kid thing really boring and wants to play video games instead.  That is to say his problem is that he's perfectly normal.)

[Galen]

(01-15-2018, 12:21 AM)Kinser79 Wrote:

(01-14-2018, 02:51 PM)David Horn Wrote: Currencies -- all currencies -- act as transactional lubricants and short term stores of value.  Note: they are not intended to provide long term store of value, because that defeats their function as trade enablers.  In fact, they need to decline in value slowly over time: fast enough to motivate trade but slowly enough to maintain discipline.

Central banks have proved that they do not have the capacity to enforce discipline economically.  Since 1914 the USD has lost almost 94% of its value.  A currency system that does not maintain a relatively stable store of value is essentially useless in lubiricating transactions, unless the goal is to speed up the accumulation of goods.  After all if a dollar today will be worth 75 cents tomorrow I may as well buy up as many things as I can as those goods will maintain their value in the main.

This also makes capital formation, particularly for small business, much more difficult. It also make planning for long term projects just that much harder.

[pbrower2a]

(01-15-2018, 12:11 AM)Galen Wrote:

(01-14-2018, 06:22 PM)pbrower2a Wrote:

(01-12-2018, 04:38 PM)Galen Wrote:

(01-12-2018, 10:14 AM)Kinser79 Wrote: Yes.  Both Galen and I have mentioned numerous times that the petrodollar can, will and eventually must end.

I would also add that it means the end of Pax Americana because it will no longer be possible to print or borrow enough money to cover the Federal Governments obligations.  It remains to be seen if there will be a formal default since there wasn't one in 1971 even though that is effectively what Nixon did in terms of the Bretton-Woods agreement.  Gary North refers to the upcoming event as the Great Default.

Resumption of the gold standard would imply a hyper-deflation. One would need a "new dollar" to reflect the current $1339.50 per ounce value of gold. That would require almost a 20-to-one revaluation to have a dollar 'worth' what it was in 1970 at the value of gold at the official exchange rate. That would make a mess of banking.

Gold fluctuates wildly in value, often reflecting political instability (people in political orders at risk of overthrow  tend to invest in gold) and stability (people selling gold after the revolutions). Supply spikes are always possible.

Prices always fluctuate during political instability.  So what?

Banking is already a mess which is hardly news.  The current price in gold reflects the steady devaluation of the dollar since 1971.  Nixon didn't want to fix the Federal Government budget then and now we have an even bigger problem than he had.  In the end all fiat currencies revert to their intrinsic value which is zero and the dollar is well on its way.

Yes, things other than gold (like diamonds and real estate) can fluctuate in value as a response to political instability. But if gold is the only 'real money', then that adds real instability to economics... and enhances such political instability as there is. Reputedly much real estate in the San Francisco Bay Area has been bought by Pakistanis who fear a revolution that will destroy their class privilege in a thoroughly messed-up country.

Population growth itself practically makes deflation a certainty on a gold standard, even if productivity per capita remains high. Gold is a possible measure of wealth, but I can think of commodities like electrical power, fossil fuels, computer data, steel, wheat, and even sulfuric acid (you can touch gold safely, but not sulfuric acid, but sulfuric acid is much more useful in industry) more powerful in determining how strong an economy is. 

If you think that gold stabilizes an economy -- remember that speculative bubbles (and the ensuing busts to which those bubbles invariably led) were commonplace before FDR took gold out of circulation.  Maybe gold gave people a certainty not merited. Maybe gold gave an unjustifiable illusion of solidity in economics.

Gold limits a money supply so that it cannot respond to a worldwide improvement in productivity. A fixed or nearly-fixed gold supply ensures deflation of prices even when productivity matches population growth.  One could use Old Master paintings as an illustration: such people as Leonardo and Rembrandt (or even Vincent!) aren't painting anymore, so if more people want those paintings, then those super-wealthy people who can buy them simply bid up the price. The common man who wants a painting must resort to an expanding number of contemporary 'starving artists', but you can be assured that anything that looks even like Leroy Neiman will be a worthless fake.

If gold is money, then people would have to resort to barter (which takes away the advantage of currency) to evade the deflation. Figuring that people might be trading things in different classifications for purposes of taxation... that messes up the system of taxation.

Of course I understand well your libertarian solution -- privatization, monopolization, and brutalization. People not in the Master Class will get to work to the limits of their abilities for the barest sustenance and be expendable when they are no longer 'adequate' in usefulness to the Master Class. What seems like the definitive freedom is only for elites, and for the rest, conditions deteriorate to those of slavery on a plantation. Libertarian ideology is as utopian as Marxism-Leninism.

[David Horn]

(01-15-2018, 12:50 AM)Galen Wrote:

(01-15-2018, 12:21 AM)Kinser79 Wrote:

(01-14-2018, 02:51 PM)David Horn Wrote: Currencies -- all currencies -- act as transactional lubricants and short term stores of value.  Note: they are not intended to provide long term store of value, because that defeats their function as trade enablers.  In fact, they need to decline in value slowly over time: fast enough to motivate trade but slowly enough to maintain discipline.

Central banks have proved that they do not have the capacity to enforce discipline economically.  Since 1914 the USD has lost almost 94% of its value.  A currency system that does not maintain a relatively stable store of value is essentially useless in lubiricating transactions, unless the goal is to speed up the accumulation of goods.  After all if a dollar today will be worth 75 cents tomorrow I may as well buy up as many things as I can as those goods will maintain their value in the main.

This also makes capital formation, particularly for small business, much more difficult. It also make planning for long term projects just that much harder.

Inflation of roughly 2% doesn't preclude capital formation, or we wouldn't be awash in capital today.  It does incentivize spending, which is the lifeblood of every economy.

[pbrower2a]

(01-15-2018, 12:50 AM)Galen Wrote:

(01-15-2018, 12:21 AM)Kinser79 Wrote:

(01-14-2018, 02:51 PM)David Horn Wrote: Currencies -- all currencies -- act as transactional lubricants and short term stores of value.  Note: they are not intended to provide long term store of value, because that defeats their function as trade enablers.  In fact, they need to decline in value slowly over time: fast enough to motivate trade but slowly enough to maintain discipline.

Central banks have proved that they do not have the capacity to enforce discipline economically.  Since 1914 the USD has lost almost 94% of its value.  A currency system that does not maintain a relatively stable store of value is essentially useless in lubiricating transactions, unless the goal is to speed up the accumulation of goods.  After all if a dollar today will be worth 75 cents tomorrow I may as well buy up as many things as I can as those goods will maintain their value in the main.

This also makes capital formation, particularly for small business, much more difficult. It also make planning for long term projects just that much harder.

1. Small businesses, especially in retailing, profit from inflation as they can add new price tags.

2. A steady stream of profits is a good enough reason for one to invest. The only question is whether one pays too much for the stream of profits.

3. So long as inflation is low enough it little effects the high-turnover activities that dominate retail as in clothing and groceries.

4. Manufacturers of big-ticket items with low turnover can usually get away with higher prices  as a capital cost for keeping such objects (vehicles, furniture, appliances) from  becoming loss-leaders.

5. Although it is hard to see where inflation becomes high enough to become politically unpopular (probably when  people cannot use a savings plan to purchase something), and interest rates start to rise, disruptive inflation indicates a dishonest government that seeks to reward debtors and punish creditors.... or to repudiate debts without admitting to doing so. Even Weimar Germany eventually solved the inflation of the mark of the old German Empire.

6. Inflation is not a problem so long as productivity and the money supply work in tandem.

[Kinser79]

(01-15-2018, 09:33 PM)pbrower2a Wrote: 1. Small businesses, especially in retailing, profit from inflation as they can add new price tags.

Actually changing prices is an expense in retail (and to a lesser extent restaurants). Furthermore inflation actually errodes the value of those profits even if they may be greater in nominal terms. The first and foremost function of money is to be a store of value. Facilitation of trade and being unit of account are secondary.

Quote:3. So long as inflation is low enough it little effects the high-turnover activities that dominate retail as in clothing and groceries.

Incorrect. While the prices of goods and services are far less sticky, wages are espeically sticky. Inflation actually deminishes the purchasing power of people's wages meaning that they actually have less disposable income which depresses discretionary spending. And when discretionary spending declines what is the first thing cut? Going out to eat. Next is buying conventional vegetables instead of the fancy pants heirloom super organic veg.

Inflation most strongly affects high turn over industries such as food service, general goods retail and grocers.

Quote:4. Manufacturers of big-ticket items with low turnover can usually get away with higher prices  as a capital cost for keeping such objects (vehicles, furniture, appliances) from  becoming loss-leaders.

Durable consumer goods in general have a larger price tag because they are durable. That being said, in large part once a plant is tooled prices of those durable goods can remain relatively stable as the only other variable expense is labor. As such inflation has less impact on the production of durable goods.

Quote:5. Although it is hard to see where inflation becomes high enough to become politically unpopular (probably when  people cannot use a savings plan to purchase something), and interest rates start to rise, disruptive inflation indicates a dishonest government that seeks to reward debtors and punish creditors.... or to repudiate debts without admitting to doing so. Even Weimar Germany eventually solved the inflation of the mark of the old German Empire.

Weimar Germany solved the inflation of the papiermark by bringing in Haljamer Schacht (who was a National Socialist and a major booster for Hitler). Further, he completely replaced the papiermark with the Reichsmark and maintained strict value controls until the start of the war with the asistance of Hitler.

Furthermore, inflation itself, eats into the value of savings. The rise of interest rates are a consequence of the declining value of those savings which are the basis of bank loans.

Quote:6. Inflation is not a problem so long as productivity and the money supply work in tandem.

True, but that rarely happens if a central bank can mark up their books by a few clicks of a few keys. The only reason why inflation hasn't become a problem in the US right now is because all that "free" fed money from QE Infinity has been used to de-leverage business and the rest has been put into the Wall Street Casino. Once it hits main street you can expect 50 dollar bread.

[Kinser79]

(01-15-2018, 05:47 PM)David Horn Wrote: Inflation of roughly 2% doesn't preclude capital formation, or we wouldn't be awash in capital today.  It does incentivize spending, which is the lifeblood of every economy.

So you are saying that the stock market isn't currently over valued? If so that doesn't explain your bearish posts elsewhere.

[pbrower2a]

(01-16-2018, 09:54 AM)Kinser79 Wrote:

(01-15-2018, 09:33 PM)pbrower2a Wrote: 1. Small businesses, especially in retailing, profit from inflation as they can add new price tags.

Actually changing prices is an expense in retail (and to a lesser extent restaurants).  Furthermore inflation actually errodes the value of those profits even if they may be greater in nominal terms.  The first and foremost function of money is to be a store of value.  Facilitation of trade and being unit of account are secondary.

Few people make money by 'storing' money. Even banks are in the business of recycling money.

Quote:

Quote:3. So long as inflation is low enough it little effects the high-turnover activities that dominate retail as in clothing and groceries.

Incorrect.  While the prices of goods and services are far less sticky, wages are espeically sticky.  Inflation actually deminishes the purchasing power of people's wages meaning that they actually have less disposable income which depresses discretionary spending.  And when discretionary spending declines what is the first thing cut?  Going out to eat.  Next is buying conventional vegetables instead of the fancy pants heirloom super organic veg.

As a rule, inflation enriches merchants who have inventories of increasing price.

Quote:4. Manufacturers of big-ticket items with low turnover can usually get away with higher prices  as a capital cost for keeping such objects (vehicles, furniture, appliances) from  becoming loss-leaders.

Durable consumer goods in general have a larger price tag because they are durable.  That being said, in large part once a plant is tooled prices of those durable goods can remain relatively stable as the only other variable expense is labor.  As such inflation has less impact on the production of durable goods.

Some very durable goods (like tools, housewares, ad many electronic devices) are very cheap. Lobster and champagne aren't cheap.

Quote:

Quote:5. Although it is hard to see where inflation becomes high enough to become politically unpopular (probably when  people cannot use a savings plan to purchase something), and interest rates start to rise, disruptive inflation indicates a dishonest government that seeks to reward debtors and punish creditors.... or to repudiate debts without admitting to doing so. Even Weimar Germany eventually solved the inflation of the mark of the old German Empire.

Weimar Germany solved the inflation of the papiermark by bringing in Haljamer Schacht (who was a National Socialist and a major booster for Hitler).  Further, he completely replaced the papiermark with the Reichsmark and maintained strict value controls until the start of the war with the asistance of Hitler.

Furthermore, inflation itself, eats into the value of savings.  The rise of interest rates are a consequence of the declining value of those savings which are the basis of bank loans.

 There is inflation (USA in the 1970s) and INFLATION (Germany in the early 1920s).

Quote:

Quote:6. Inflation is not a problem so long as productivity and the money supply work in tandem.

True, but that rarely happens if a central bank can mark up their books by a few clicks of a few keys.  The only reason why inflation hasn't become a problem in the US right now is because all that "free" fed money from QE Infinity has been used to de-leverage business and the rest has been put into the Wall Street Casino.  Once it hits main street you can expect 50 dollar bread.

A gold standard would mandate deflation just to meet population growth with no decline in GDP per capita. Money growth is rightly tied to productive activity and not to the availability of some shiny, colorful metal with some weird chemical properties

[David Horn]

(01-16-2018, 09:55 AM)Kinser79 Wrote:

(01-15-2018, 05:47 PM)David Horn Wrote: Inflation of roughly 2% doesn't preclude capital formation, or we wouldn't be awash in capital today.  It does incentivize spending, which is the lifeblood of every economy.

So you are saying that the stock market isn't currently over valued?  If so that doesn't explain your bearish posts elsewhere.

The stock market has almost nothing to do with capital formation, with the rare exception of IPOs.  Instead, look at the amounts carried forward on balance sheets or stock buybacks, if stock is your thing.  Or just look at one or two companies.  Apple has so much cash stashed overseas that it's running out of places to put it.  Amazon, on the other hand, is just buying everything in sight  So is Berkshire-Hathaway.

But yes, the stock market is overpriced.  Stocks are based on economic activity: P/E ratios typically.  With so much of the worlds wealth being bottled-up by the few, P/Es are on the rise.

[pbrower2a]

True. The valuation of a stock is basically the expected future value of dividends. I bought stock in 2009 when dividends were higher than interest on savings or from bonds. That was at the end of the meltdown.

Had I been an investor with bigger funds, then I might be rich insat4ead of broke (I had to spend it on my father's nursing-home care and paying off some of his debts).

[Kinser79]

(01-16-2018, 04:47 PM)David Horn Wrote: The stock market has almost nothing to do with capital formation,

Mr. Horn do you not realize that you have essentially just proved to me that you are economically illiterate? Corporations sell stock for the express purpose of raising capital to use it for whatever they want to use that capital for. Why investors buy stock from this or that corporation is pretty much irrelevant.

While the vast majority of businesses in the US are not corporations listed on the NYSE, to say that the stock market is not a means for those corporations that are to raise capital. Indeed that is the raison d'etre of stock markets in general.

Further, considering that a large proportion of businesses in the US are not corporations at all, inflation limits the ability of those businesses to acquire capital. Why is that? Because there is great difficulty to to acquire capital faster than the corrosion of value of the currency through inflation

[pbrower2a]

(01-18-2018, 10:51 AM)Kinser79 Wrote:

(01-16-2018, 04:47 PM)David Horn Wrote: The stock market has almost nothing to do with capital formation,

Mr. Horn do you not realize that you have essentially just proved to me that you are economically illiterate?  Corporations sell stock for the express purpose of raising capital to use it for whatever they want to use that capital for.  Why investors buy stock from this or that corporation is pretty much irrelevant.  

While the vast majority of businesses in the US are not corporations listed on the NYSE, to say that the stock market is not a means for those corporations that are to raise capital.  Indeed that is the raison d'etre of stock markets in general.

Further, considering that a large proportion of businesses  in the US are not corporations at all, inflation limits the ability of those businesses to acquire capital.  Why is that?  Because there is great difficulty to to acquire capital faster than the corrosion of value of the currency through inflation

Ignoring the issuance of new capital, stock splits and buy-backs, mergers, and various forms of restructuring (debt is transformed into ownership, the transfer of a non-initial share of stock from one person to another does not itself create capital. Thus if I buy a share of stock in Comerica, Ford Motor Company, Proctor&Gamble, Wal*Mart, Xerox, or Coca-Cola I am buying a representation of the value of the company from a previous owner. My purchase of stock on the market does not infuse cash into the company whose stock I buy.

Incorporated, exchange-traded businesses create capital through profitable operations and wise investments. Basically one buys a stock as a stream of dividends unless one is a day-trading gambler.

[David Horn]

(01-18-2018, 10:51 AM)Kinser79 Wrote:

(01-16-2018, 04:47 PM)David Horn Wrote: The stock market has almost nothing to do with capital formation,

Mr. Horn do you not realize that you have essentially just proved to me that you are economically illiterate?  Corporations sell stock for the express purpose of raising capital to use it for whatever they want to use that capital for.  Why investors buy stock from this or that corporation is pretty much irrelevant.  

While the vast majority of businesses in the US are not corporations listed on the NYSE, to say that the stock market is not a means for those corporations that are to raise capital.  Indeed that is the raison d'etre of stock markets in general.

Further, considering that a large proportion of businesses  in the US are not corporations at all, inflation limits the ability of those businesses to acquire capital.  Why is that?  Because there is great difficulty to to acquire capital faster than the corrosion of value of the currency through inflation

With the exception of new stock offerings, of which there are very few, stock markets trade old shares for new money.  The capitalization of those old shares occurred in the past -- often in the distant past.  To be honest, the opposite is happening right now.  Old shares are being purchased by the corporate treasuries that issued them and are "banked" by those corporations to prop-up the price of the remaining shares.  That could be called capital retirement.

[pbrower2a]

(01-18-2018, 03:32 PM)David Horn Wrote:

(01-18-2018, 10:51 AM)Kinser79 Wrote:

(01-16-2018, 04:47 PM)David Horn Wrote: The stock market has almost nothing to do with capital formation,

Mr. Horn do you not realize that you have essentially just proved to me that you are economically illiterate?  Corporations sell stock for the express purpose of raising capital to use it for whatever they want to use that capital for.  Why investors buy stock from this or that corporation is pretty much irrelevant.  

While the vast majority of businesses in the US are not corporations listed on the NYSE, to say that the stock market is not a means for those corporations that are to raise capital.  Indeed that is the raison d'etre of stock markets in general.

Further, considering that a large proportion of businesses  in the US are not corporations at all, inflation limits the ability of those businesses to acquire capital.  Why is that?  Because there is great difficulty to to acquire capital faster than the corrosion of value of the currency through inflation

With the exception of new stock offerings, of which there are very few, stock markets trade old shares for new money.  The capitalization of those old shares occurred in the past -- often in the distant past.  To be honest, the opposite is happening right now.  Old shares are being purchased by the corporate treasuries that issued them and are "banked" by those corporations to prop-up the price of the remaining shares.  That could be called capital retirement.

True. Dividends are no less a drain upon a business' capital than is interest.  The biggtest owners might prefer the buying of stock to paying off dividends.

[Galen]

(01-18-2018, 02:44 PM)pbrower2a Wrote:

(01-18-2018, 10:51 AM)Kinser79 Wrote:

(01-16-2018, 04:47 PM)David Horn Wrote: The stock market has almost nothing to do with capital formation,

Mr. Horn do you not realize that you have essentially just proved to me that you are economically illiterate?  Corporations sell stock for the express purpose of raising capital to use it for whatever they want to use that capital for.  Why investors buy stock from this or that corporation is pretty much irrelevant.  

While the vast majority of businesses in the US are not corporations listed on the NYSE, to say that the stock market is not a means for those corporations that are to raise capital.  Indeed that is the raison d'etre of stock markets in general.

Further, considering that a large proportion of businesses  in the US are not corporations at all, inflation limits the ability of those businesses to acquire capital.  Why is that?  Because there is great difficulty to to acquire capital faster than the corrosion of value of the currency through inflation

Ignoring the issuance of new capital, stock splits and buy-backs, mergers, and various forms of restructuring (debt is transformed into ownership, the transfer of a non-initial share of stock from one person to another does not itself create capital. Thus if I buy a share of stock in Comerica, Ford Motor Company, Proctor&Gamble, Wal*Mart, Xerox, or Coca-Cola I am buying a representation of the value of the company from a previous owner. My purchase of stock on the market does not infuse cash into the company whose stock I buy.

Incorporated, exchange-traded  businesses create capital through profitable operations and wise investments.  Basically one buys a stock as a stream of dividends unless one is a day-trading gambler.

You have once again proven yourself to be an economic illiterate.  Selling stock is but one way to raise capital.  There are many privately held corporations that often got their start from the savings of one or more founders.   A sole proprietorship or partnership will often save up profits in order to acquire capital equipment to improve their operations.

Individuals will often save money for future expenditures such as retirement which is much easier to do when you don't have assholes at the Fed debasing the currency and useful idiots like you cheering them on.

[pbrower2a]

(01-19-2018, 03:49 AM)Galen Wrote:

(01-18-2018, 02:44 PM)pbrower2a Wrote:

(01-18-2018, 10:51 AM)Kinser79 Wrote:

(01-16-2018, 04:47 PM)David Horn Wrote: The stock market has almost nothing to do with capital formation,

Mr. Horn do you not realize that you have essentially just proved to me that you are economically illiterate?  Corporations sell stock for the express purpose of raising capital to use it for whatever they want to use that capital for.  Why investors buy stock from this or that corporation is pretty much irrelevant.  

While the vast majority of businesses in the US are not corporations listed on the NYSE, to say that the stock market is not a means for those corporations that are to raise capital.  Indeed that is the raison d'etre of stock markets in general.

Further, considering that a large proportion of businesses  in the US are not corporations at all, inflation limits the ability of those businesses to acquire capital.  Why is that?  Because there is great difficulty to to acquire capital faster than the corrosion of value of the currency through inflation

Ignoring the issuance of new capital, stock splits and buy-backs, mergers, and various forms of restructuring (debt is transformed into ownership, the transfer of a non-initial share of stock from one person to another does not itself create capital. Thus if I buy a share of stock in Comerica, Ford Motor Company, Proctor&Gamble, Wal*Mart, Xerox, or Coca-Cola I am buying a representation of the value of the company from a previous owner. My purchase of stock on the market does not infuse cash into the company whose stock I buy.

Incorporated, exchange-traded  businesses create capital through profitable operations and wise investments.  Basically one buys a stock as a stream of dividends unless one is a day-trading gambler.

You have once again proven yourself to be an economic illiterate.  Selling stock is but one way to raise capital.  There are many privately held corporations that often got their start from the savings of one or more founders.   A sole proprietorship or partnership will often save up profits in order to acquire capital equipment to improve their operations.

Founders usually formalize their contributions as stock. Did I not mention 'retained earnings', some of which are profits on the book but not in liquid form? Most businesses try to avoid being 'cash rich'. Of course there is borrowing as bonds or bank loans.

So what if I did not address everything?

...College-level business classes typically deal in public corporations that have financial statements suitable for analysis. So one is more likely to see AT&T than Koch Industries as an example in a course on accounting or finance.

Quote:Individuals will often save money for future expenditures such as retirement which is much easier to do when you don't have assholes at the Fed debasing the currency and useful idiots like you cheering them on.

It is far easier to save for retirement when one has a solid income, often the result of formal education either free or heavily subsidized, and if there is enough economic activity (including transportation on public roads) to create solid incomes for many.

Social Security allows people to make investments in high-quality common stock or to start businesses by creating some economic safety for old age.

Now who is the fool?

[Galen]

(01-19-2018, 02:49 PM)pbrower2a Wrote: It is far easier to save for retirement when one has a solid income, often the result of formal education either free or heavily subsidized, and if there is enough economic activity (including transportation on public roads) to create solid incomes for many.

Social Security allows people to make investments in high-quality common stock or to start businesses by creating some economic safety for old age.

Now who is the fool?

You are a fool and always were.  Taxation and inflation make it much harder for an individual to save.  As always you miss the point, which is that inflation tends to hurt those who can not own the financial assets that the rich do which was always the explicit purpose of QE which was to prop up the prices of financial assets and real estate.

Fucking Boomers.  In the general case your generation was too stupid to live because you are like spoiled children.

[David Horn]

(01-19-2018, 03:49 AM)Galen Wrote: You have once again proven yourself to be an economic illiterate.  Selling stock is but one way to raise capital.  There are many privately held corporations that often got their start from the savings of one or more founders.   A sole proprietorship or partnership will often save up profits in order to acquire capital equipment to improve their operations.

Which has nothing to do with the stock market. If you notice, that was the original issue on this thread.

Galen Wrote:Individuals will often save money for future expenditures such as retirement which is much easier to do when you don't have assholes at the Fed debasing the currency and useful idiots like you cheering them on.

'Debasing the currency', as you call it, is the only way to generate consistent economic activity. If currency held its value forever, no one would be motivated to spend a dime unless it was necessary. That's a prescription for stagnation or worse.

[David Horn]

(01-20-2018, 09:36 AM)Galen Wrote: ...  Taxation and inflation make it much harder for an individual to save.  As always you miss the point, which is that inflation tends to hurt those who can not own the financial assets that the rich do which was always the explicit purpose of QE which was to prop up the prices of financial assets and real estate.

Always looking at the bottom line and ignoring the top line. You can't save what you don't have to save. Economic activity creates the top line you so strongly wish to preserve, but are unwilling to create in the first place.

Galen Wrote:Fucking Boomers.  In the general case your generation was too stupid to live because you are like spoiled children.

99% of the economic model currently in play can be traced directly to Ronald Reagan's economic policies. Reagan was many things, but a Boomer isn't one of them.

[Kinser79]

(01-18-2018, 03:32 PM)David Horn Wrote: With the exception of new stock offerings, of which there are very few, stock markets trade old shares for new money.  The capitalization of those old shares occurred in the past -- often in the distant past.  To be honest, the opposite is happening right now.  Old shares are being purchased by the corporate treasuries that issued them and are "banked" by those corporations to prop-up the price of the remaining shares.  That could be called capital retirement.

While the majority of sales on the stock market are value based speculation the main function of a corporation to offer stocks in the first place is to raise capital.  Which as Galen has pointed out elsewhere is more difficult due to inflation and taxation.

Capital retirement is utterly retarded.  I don't even know where to begin.  The purpose of having capital is to use it to produce a commodity to sell at a profit and render more capital, ad infinitum.

I'm unsure as to the reasons why corporations would buy back their stocks to prop up the price, but I know that retiring their capital is not the reason.  Unless of course the purpose is to ultimately destroy the company itself--which given the self-destructive tendencies of Boomers is not unheard of.

I do have a hypothesis why some companies might do just that, well two really:

1.  A company that has a higher price per share may be more attractive as a long term investment for managed funds (how most retail stock transactions are handled via 401(k) and similar retirment formats);

2.  A company may be retiring capital in the US to raise capital elsewhere..say China or Russia or any other number of emerging markets.

In the case of option 2, the stock market will enter a long term bear market once the majority of boomers retire to attempt to live off their savings and investments.  This will depress the stock market, real estate and other assets in the US.  Other emerging markets have younger populations than the US on average and this is likely to remain the case for some time.  Also there may be a perverse taxation incentive to do just that as well.