bj,
If everyone had all the knowledge they needed then there would be negilible gains to be made through share trading as there would be no loosers, kind of the same as how if everyone knew all they need to know then everyone would be green as it provides the greatest long term profit. lol.
but alas the vast majority of people are both myopic and stupid, and as you say; not in the least bit rational.

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My point is that rationally acting share traders and investors will only purchase shares in companies which they perceive will increase in value

Ouch!… they are humans, so they do not usually act rationally. If they are Americans they will only do the right thing when all other options have been exhausted (someone told me that joke and as an American I absolutely believe it).

Anyway… the thing is that you’re right. In a transparent market with people knowing the things they NEED to know, this mess and others would not be the problem it is. Greens don’t diss the market… to be fair I doubt if there is actually any uniformity of view of it at all through the party.

respectfully
BJ

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Kevyn,
I agree with you that share traders are there, in some cases, for motivations different to investors and I agree with you about the perils of shares as shares are, at least in my view, one of the main sources of myopicism in the market and as such one of the main causes of market collapse as CEO’s are pushed to make more and more short term profit at the cost of long term profit in order to keep their jobs, the result of this being a unsustainable company, somewhat like the growth fetish we have with the economy.
My point is that rationally acting share traders and investors will only purchase shares in companies which they perceive will increase in value and as such they are distributing cash where they believe it will be most profitable; though as aforementioned I do not necessarily agree with the practice.

Nommopilot,
An act member with which I associate expressed to me the other day that it was her opinion that children born to poverty were poor of their own fault and that they had all the same chances at success as a rich child, her essential argument being that poor children are poor of their own faults. Even I find that scary, lol.

Roy,
Agreed that the trading should be regulated, although I do not believe I have expressed it in this forum I am in support of speculative taxes such as Tobin tax and capital gains tax in an attempt to stop speculation. I would also agree with your less than zero-sum game (though the terminology is somewhat questionable ) assertion, my point was mearly that in a properly operating system those actors are not parasites but symbiotes and that they do actually produce and do have every right to gain from their exchanges.

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Valis

The people in the Greens that I get to talk to seem to understand and agree. How much is polite head nodding I can’t say, but Russel is sharp enough and has brought parts of it up before. The party as a whole has always objected to the “growth-is-good” meme, and while some people’s reasoning may be a lot fuzzier than others, that meme is supported pretty strongly.

How to respond is, I think, a matter of not making mistakes. Easier said than done as any chess player can tell you.

First: Not creating too many dependencies on the economies of the rest of the planet with respect to feeding our own. Ensuring that basic needs can be met through existing local resources. (Isolationist – I know).

Second: Funding growth and investment out of our savings, our money not out of debt that is passed on to generations to come. That slows growth down quite seriously and I don’t know if we can do it cold turkey, and it could be argued that we should make exceptions for things that will benefit multiple generations… but overall this is the target.

Third: As part of item one, take some measures to support local industry and technology and the people who work in technology, remaining in NZ. With population and country being the sizes they are, at the distances from market they are, we have to be very aware of the potential that our best will leave and that our migrant intake will not measure up in terms of abilities. That has to be avoided.

We may need to consider closer ties with Oz on that basis?

In any case, those are what I’ve thought of to answer for now. Tentative those answers. I reserve the right to be wrong.

respectfully
BJ

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I agree, very lucid summary with a nice historical context. Alexander Hamilton has a lot to answer for.

bj, given NZ’s minnow status in the vast ocean of sharks, what do you believe is the best way for us to respond? How close is this to the Greens programme of sustainable infrastructure and local investment?

Thanks.

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Sapient wrote: “What you seem to fail to comprehend is that without those whom invest in and trade shares in corporations the capital would not be moved to where it would be most productive …”

That’s not what has happened though, is it?

I agree that investing, trading and corporations have an important place – there are many useful enterprises that cannot take place without collecting resources in a particular place. However these activities need to be regulated so that they don’t spiral out of control and become an end in themselves, divorced from their underlying value. Regulation is also needed to prevent us from stealing from future generations.

This regulation has failed to happen (in fact quite a lot of effective regulation has been removed), and much of the investment going on is a zero-sum (possibly less than zero-sum?) game on a badly queered pitch. Like cells in the body that start reproducing uncontrollably, these activities that should benefit society have become a cancer.

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“As for someone from a poor background getting rich, I have no problem at all with that.”

my problem is that parties like national and ACT pretend it’s a possibility for more than an extremely small minority of people. the idea that people at the bottom don’t aspire for a better life without the supposed incentive of paying less tax when they get there shows they have no idea. do any minimum wage workers wake up and think “glad I didn’t take that contact energy directorship, think of the tax I’d be paying. thank god I work at KFC”?…

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BJ…excellent summation.

If I try to understand all this as an uneducated bystander I come up with these concepts:

1) Money, as a mere TOKEN of effort or skill, makes it easy to underestimate and manipulate the true value of an individuals work. Maybe we need to head back to a barter system.

2) So many groups are responsible for eating away at the true value of a dollar, by virtue of a whole range of behaviours that are founded on being able to get access to money without having to truly earn it.
Some examples:
Many bankers and financiers
Welfare beneficiaries
Credit recipients who dont pay back.
etc etc etc

I think we are seeing what is effectively a huge “revaluation” of what a dollar is worth. Whether we see huge deflation or inflation as a result remains to be seen.

My prediction is that the next 5 years will trend towards record inflation.

Isn’t that what happens when governments pump newly printed millions into an economy just to keep it afloat? Isn’t that the real effect of governmental “bailout” schemes underway around the world?

I think maybe they will have the effect of smoothing the waters for a year, then chucking us further into the shark tank.

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There are a lot of partial answers floating about here…

The larger class of parasites are financiers. There’s a couple of ways this has happened. A couple of seriously troubling ways that came into being through unregulated and deregulated trading arrangements. Real money financiers play a role that is NOT parasitical, but they are invisible in the market now, having been driven out by the debt-merchants.

In much the same way as the house take can be altered at a casino, the banks (and insurers) have been “cooking the books” with respect to the risk they were taking vs the risk they were being paid to take. This is a long-term imbalance which most country’s bankers enjoy. It isn’t large, but it is fundamentally a theft from every depositor and every borrower in the system. Likely to be less than a penny on the dollar every year, but it is part of the reason that those institutions were building to positions of unassailable wealth.

The bankers are not however, purely parasites as they ARE providing an essential service (so long as/to the extent that – they are honest bankers). Can’t do without them. Do have to watch them. One part of the problem is that we went and handed the entire responsibility for the money supply over to them. A situation of which Jefferson pointedly disapproved:

“[The] Bank of the United States… is one of the most deadly hostility existing, against the principles and form of our Constitution… An institution like this, penetrating by its branches every part of the Union, acting by command and in phalanx, may, in a critical moment, upset the government. I deem no government safe which is under the vassalage of any self-constituted authorities, or any other authority than that of the nation, or its regular functionaries.” ~Letter to Albert Gallatin, 1803

-and-

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

The situation he so describes pertains in every nation of the OECD, the whole of the habitable earth and parts of Australia. If we could hook up a generator to his spinning in his grave he could power the state of Virginia.

-but like an infomercial for ginsu knives it continues –

About half the collapse risk we endure now comes from the big commercial banks having finally won the removal of a law that dated back to the depression. A law that flatly prohibited them from going into “investment banking”. They have lobbied for its removal for decades. The image of a group of corpulent bankers congratulating themselves on having removed the gate lock and running to dive headlong into a pool of sharks presents itself. They were so used to controlling the risk THEIR way they didn’t notice that in the shark pool, the rules are vastly different.

Still, it would not normally have hurt quite so much. Unfortunately, someone altered the environment in the shark pool. The CDS debacle appeared (The sharks got the ability to take bites off 10 bankers with one snap of the jaws) and for an explanation of the CDS ( I am wondering if you REALLY need all this background but I am sure someone who reads will ) we probably should refer to this….

http://www.gold-eagle.com/editorials_08/tan041608pv.html

That link is important. You can’t get the truth until you read it through.

Now the defenses mounted by various culpable parties would be as follows:

bankers: “the regulations allowed us to…”; “there was no requirement to MTM (Mark to Market) those instruments”. It was the Politicans who let us do this.

pollies (who eased the regulations): “deregulation is generally in the best interest of our country. Despite the advice offered by industry experts (a.k.a. lobbyists) we appear to have missed some of the risks. Still the regulators should have caught this.

regulators: “the politicians gutted our budgets. We were unable to keep up with the market”

++++++++++++++++++++++

Now all of this is water well under the bridge and irretrievably mixed with the ocean. We have the problems we have. Many of those problems have their roots in “greed, fraud and the American Way” (borrowing from the original superman).

The problem is that the DEEPER problem remains even if G20 were to go into emergency session and rule a bunch of CDS contracts unenforceable. The deeper problem is that good times and bad, we have been “stimulating” our economy like the growth junkies we are.

http://mises.org/story/2901

http://globaleconomicanalysis.blogspot.com/2006/12/reader-question-on-deflation.html

It takes a hell of a lot of inflationary effort now just to keep the bankers warm… actually getting them to do useful work is almost impossible.

Basically what government has done is herd the general public into the shark pool so that the bankers don’t get eaten for their mistake in jumping in. Note that some banks may die anyway. The sharks are not starving to death. The problem has not been solved.

+++++++++

At the larger level, the people who actually produce the “something of value” that capitalism must have in order to work, are not paid properly in comparison to the ones who control the investments. That makes it appear, particularly now when almost all investments are losers, that the folks who control the investments are simply parasites. They may actually have a valid “something of value” to contribute in a perfectly implemented capitalism. They have a place in the structure. They abandoned that place decades ago.

respectfully
BJ

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Sapient, You fail to understand the difference between investing and trading in a company’s shares. The former is done by people who either risk everything for a high return on new shares which pump new money into a company, or by people who want a modest dividend reward each year in return for taking a modest risk that the company might be mismanaged. Traders want the rewards of the former while only taking the risks of the latter. When traders convince directors to reward managers with shares instead of cash they are merely ensuring that the company will be run for the short term benefit of the current shareholders and that there will magicaly be enough stupid or ill-informed future shareholders to trade the shares with before the company collapses and the shares become worthless or worth less. This is one of the few areas where pyramid schemes are still legal.

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Kelpie and Roy,
What you seem to fail to comprehend is that without those whom invest in and trade shares in corporations the capital would not be moved to where it would be most productive and as such those companies that would benifit society through providing jobs would not get the capital they require to create those jobs and as such those whom play around in the share markets serve society well and are prehaps the most productive of actors, if they do the job better than others in the market then by all means they should profit.
Infact, almost the only people whom do not benifit society through their own quest for their own personal good are politicians, benificiaries, and trade unionists. Lol.

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Kelpie,

How is a stock trader a “parasite”?

How is a money trader a “parasite”?

If you want to see parasites look at thousands of public sector employees and look at thousands of welfare spongers.

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# Roy Says:
October 25th, 2008 at 2:43 pm

nommopilot,

As for someone from a poor background getting rich, I have no problem at all with that. People getting rich from money trading or stock trading on the other hand I do have a problem with, as they are just parasites (they don’t actually produce anything), and we are about to bear the rather high cost of their greed.
Well said Roy.

For over 2 thousand years we have been warned about usury.
Still we have the band of merry followers extolling the virtues of rapacious scoundrels who gamble with the lives of the starving millions, all in the name of mammon.

It is good to be rich if you have achieved it by making work & comfort for others.
He was known in the trade as the smiling assassin.
Hearing the words relief from his lips sends a cold shudder down my spine.
Men died on relief—-read & know your history before it is too late.

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emmess Says:
October 25th, 2008 at 7:29 pm

>> I am extremely happy that the oil price has crashed given that economic growth has stopped which is partially due to the oil price rising in the first place, and the falling oil price will help growth to resume.

I’m actually still doubtful about whether the financial crisis was caused by the high oil prices, or just by the dubious ‘financial instruments’.

But anyway, the resumed economic growth will very soon get us back to wanting more oil than the peak extraction level that the market has been trying unsuccessfully to breach since 2005. This will lead to another spike in oil prices. If the currrent financial crisis was caused by oil prices, that spike will lead to another economic collapse that will bring the oil price back down and start the cycle again.

Of course, through all this turmoil, people will adapt to using less oil, and using oil more efficiently. But there’s likely to be a lot of pain in the process. are you happy about that?

there is a certain beauty to the mathematical cause and effect of financial booms and busts, but only if you ignore what they mean to the physical world where people actually live.

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Global warming for millionaires indeed…

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http://www.worldwildlife.org/travel/2009/Africa/WWFTripitem7467.html

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>>The right wingers love it that the oil price is crashed, which is basically ‘cos economic growth has stopped

I am extremely happy that the oil price has crashed given that economic growth has stopped which is partially due to the oil price rising in the first place, and the falling oil price will help growth to resume

Cause and effect – something you lot wouldn’t understand

Besides greenies doen’t even want economic growth anyway

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kiwinuke Says:
Yeah, all those left wing investment bankers have gone and got the whole world into a pile of trouble cos they didn’t know how to balance their books – in fact. they didn’t even know how to value their books as it turned out.

1) A major part of the problem was providing home finance to poor people. Maybe they should have continued to let them live in the gutter?

2) The other part of the problem was that the financial system had become founded upon “turnover” rather than “capital”. (eg: fractional banking).

Basically it had become a huge pyramid scheme; destined to reach a sudden end.

The irony is that two contrasting groups caused the pyramid bubble to burst:

Firstly, those who clipped the ticket and made money on transactions rather than real work (eg like John Key)

Secondly, those who did absolutely nothing to generate income, and got their money for nothing (eg like most NZ beneficiaries)

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Jed1 Says:
October 25th, 2008 at 5:40 am

Tell me why is it sooooo so so bad if a guy makes some money during his career? Would we all be better of if the country had 10000 more people like John Key? I just don’t get why NZer’s as so anti any one who makes money. I wish I was as successful.
……………………………
He makes money, he just doesn’t make anything useful for it.

“How is it that – in a free market system, where people are supposed to be rewarded according to how much they provide to others – today’s biggest prizes go to those who provide so little? Mr. Jenkins and Mr. Blankfein do not add in any appreciable way to the world’s wealth. Instead, they merely move it around – from middle and lower class taxpayers to the super-rich…from householders to speculators…and, by loading up the world with debt, from the future to the present.

The answer is to be found in the details of modern finance.”
http://www.dailyreckoning.com/Issues/2007/DR012607.html

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‘s funny. The right wingers love it that the oil price is crashed, which is basically ‘cos economic growth has stopped. When economic growth returns, then the oil price will be back up.

Eventually, of course, the slaves will be operating the exercycle…

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http://investorshub.advfn.com/boards/read_msg.aspx?message_id=33013790

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