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View Diary: Give Me One Good Reason Why The Rich Should Pay Higher Taxes (214 comments)

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  •  b/c the stock market isn't the economy (5+ / 0-)

    The rich don't do anything useful with all their money. If they were spending it all on toys like a million little Louis XIVs, then things just might be different. All that consumption would provide an enormous stimulus to the economy: more jobs across the board meeting not just the demand of the rich, but of everyone else, especially if you bring back those nice high union wages and benefits packages.

    Instead, the rich squirrel it all away into paper assets - stocks, bonds, etc. - where it's expected to multiply all on its own (whole different rant there) and basically take it out of circulation. The more money they're able to keep their hands on, the more money they take out of the real economy, and the less money is available to pay working people and make the American Dream come true for them.

    •  Only in America could consumer spending (1+ / 0-)
      Recommended by:
      coffeetalk

      be considered more important than business investment.

      •  Read my (4+ / 0-)
        Recommended by:
        Ahianne, Into The Woods, Visceral, DawnN

        tag.

        "If I pay a man enough money to buy my car, he'll buy my car." Henry Ford

        by johnmorris on Thu May 13, 2010 at 05:54:16 PM PDT

        [ Parent ]

      •  Investing in factories, etc vs investing in paper (3+ / 0-)
        Recommended by:
        Ahianne, Into The Woods, DawnN

        Mines, factories, transportation infrastructure, power plants, human capital (skilled craftsmen, engineers, technicians, etc.): that's investment - you take raw resources that aren't worth very much and turn them into something that is worth much.

        Stocks, bonds, etc. that as we're seeing aren't worth the paper they're printed on without an unlimited lifeline from the US taxpayer don't qualify as investment because they have no inherent value: it's only all that money with nothing else to do chasing after them that gives them value. They're a self-fulfilling prophecy ... until they're not: then they're worthless.

        •  "no inherent value" (1+ / 0-)
          Recommended by:
          coffeetalk

          au contraire; they're worth the net present value of future dividends.

          •  And where do dividends come from? (0+ / 0-)

            You answer me like you've just memorized that cute little phrase by rote, and have absolutely no idea what it means. It's part of the Masters of the Universe's dream of a totally self-referential closed system of money endlessly changing hands (and magically multiplying in the process) that just blew up in case you didn't notice.

            Dividends are profit, and once upon a time, profit came from selling products (usually physical) that were worth more than the raw materials and labor that were used to make them. In order to sell something, you need to make it - i.e. mines, factories, engineers, etc. - and you need someone to buy it: i.e. a large and comfortable middle class.

            The simplest and therefore most reliable method of achieving profit (and therefore dividends) involves making things that are useful and enjoyable and selling them to people with plenty of disposable income.

            •  I answered your question accurately. (1+ / 0-)
              Recommended by:
              VClib

              Having earned a B.A. in philosophy, I can assure that I didn't learn finance by rote.

              I did learn, however, how to spot non-responsive non-answers.  Your comment here falls into that bucket.

              •  You haven't answered anything (0+ / 0-)

                It's your comments that have been the "non-responsive non-answers". Your first answer was so completely devoid of explanation, and stated with such certainty, that how can I believe it's anything other than a glib and superficial understanding of economics at its most ideal, therefore abstract, and therefore irrelevant that came right out of a textbook? Your second answer isn't any better. You don't address any of the points I've made, not even to demolish them.

                I expect better from a philosopher.

                •  Your initial comment stated that stocks (1+ / 0-)
                  Recommended by:
                  VClib

                  only have value because someone else is willing to buy them at a higher value. ("it's only all that money with nothing else to do chasing after them that gives them value.")

                  That's simply false; a stock pays dividends and grants control.  Of course, if you were a reasonable interlocutor, you'd point out the equity premium, but after being on Kos for so many years I'm used to having to make arguments for others.  So I just plopped your counterargument in your lap.  You can do something useful with it, or not, either way is fine w/ me.

                  •  Same as before: theory versus reality (0+ / 0-)

                    If no-one is willing to buy a stock from you, then it's value cannot be anything more than the dividends it delivers over the time that you hold it. That can be as little as a couple cents per quarter, especially for large companies with millions of shares available. Even thousands of pennies only add up to a few hundred dollars. There's much more money to be made by all involved (but especially by the rich with the most skin in the game) by trading stocks rather than sitting on them, hence the far more important measure of a stock's value is driven by demand for the stock.

                    Control? Control over what exactly? A corporation? Yeah, my theoretical handful of shares versus institutional investors collectively holding millions of shares and the CEO's single largest percent of ownership of the company.

                    As for the equity premium, economists can't even agree on why it exists at all. My argument would be that, as we've seen, there are plenty of traders smart enough and/or with enough institutional money and computer power at their disposal to make money on the short-term volatility of the stock market - most of it engineered by those same traders - and by the ability of a stock to go almost arbitrarily high or low in price, rather than wait for the long-term and more importantly fixed payoff as you would with a bond.

                    You're thinking in terms of ideal situations, where everything works the way the system's cheerleaders have decided it should work. The ideal is completely irrelevant to me, and will never convince me of anything. I'm talking about the way things actually do work, and from that perspective, I'm right.

      •  Shadow Bank Bets on Derivatives (2+ / 0-)
        Recommended by:
        Visceral, DawnN

        is mere speculation, not investment.

        When the wealth diverted into that shadow system exceeded the wealth in the public exhanges, they were no longer supportable as "side bets", "hedges" or "insurance".

        It's 'redistribution' whether it happens before or after the money is made and whether it goes up to a small group or down to a larger one.

        by Into The Woods on Thu May 13, 2010 at 06:46:05 PM PDT

        [ Parent ]

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