economic injustice and the taboo about the stock market

[roger]

If you have a few million dollars, you can make a hundred thousand or so each year by investing, without doing a thing. The more money you have, the more you can make by investing. If you have a hundred million, you can easily make a million every year- without working.

 

Others work their asses off and make twenty grand a year.

 

There needs to be a public outcry against this utter injustice in my opinion.

[Eques Peregrinus]

Well that's not really a taboo, the reason taxes are not equitable (a rich guy will be taxed far more than a poor one, well except for fiscal paradises or countries without taxes for its citizens), is an attempt to rebalance this economic problem.

 

However, the gap in salaries is currently widening, which is going to become a major problem in the future. An other economic problem, which is going to concern us far sooner is the public debt, and the consequences of prolonged negative interest rates (that cheap money favorise dangerous speculations).

[Karl]

If you have a few million dollars, you can make a hundred thousand or so each year by investing, without doing a thing. The more money you have, the more you can make by investing. If you have a hundred million, you can easily make a million every year- without working.

 

Others work their asses off and make twenty grand a year.

 

There needs to be a public outcry against this utter injustice in my opinion.

Do you mean in the current crony environment in which the stock market no longer exists, but has been replaced by the state and its federal reserve ?

 

If that's the case I agree with you.

 

However if you are talking about the stock market as a free market entity then you are dead wrong. The stock market-in a laissez faire capitalist sense is an absolute necessity for everyone rich or poor-it's also a very high risk environment and you have to have the money to invest in the first place, it didn't grow on a tree, it had to be worked for and saved. Far from stock brokers and investors 'doing nothing' to make money, they do a lot, they create businesses and are responsible for resource allocation. They drive down the prices of good for individuals, increase efficiency, maintain supply, create alternatives to shortages, increase competition and innovation. In short they are an absolute necessity without whom we woukd all be walking around in rags and starving.

Edited May 14, 2016 by Karl

[Michael Sternbach]

Karl's comment is interesting (hey, I happen to approve of a post of his for the second time today - what's going on here?!) I will supplement this with a metaphysical perspective, as would be expected from me.

 

Earth is a place where all kinds of concepts can be tested and manifested, for the improvement of the individual and the whole. Wealth is one of them. In my view, if mankind develops the way it should, there will one day be wealth available to everybody, with little effort. Leaving time for people to unfold their creative urges without financial pressures. Yes, it sounds like Utopia. However, in my country there is some serious discussion about giving every citizen a couple of thousand francs monthly, besides whatever income they may or may not have. I think that's a wonderful idea. But I'm afraid that it may not happen any time soon because of objections by people who are thinking just like Roger. Such as: Wouldn't that be an injustice toward non-Swiss?

 

I, for one, have no problem with people getting money by investing in stocks, winning the lottery, or inheriting it. Some people are luckier than others, this is not going to change any time soon. And mind you, there are many ways in which one may or may not be priviledged; having money is no guarantee for happiness. But it allows you to do good for yourself and others. Nothing wrong with that.

 

Oftentimes, people who are talking like Roger are envious of those more priviledged. They would seize the opportunity for effortless financial gain themselves, were they offered the chance. My advice: Don't try to restrict the possibilities that others may have. Expand your own - and those of the people that you can help.

[ralis]

The stock market is a rigged system for the big banks and that has been proven by such writers as Michael Lewis. 'High frequency trading' dominates the market in which a high volume of trades are executed every second by the same broker. Further, banks such as Goldman Sachs are able to monitor volume and positions on the NY Stock Exchange and use HFT to trade against any position or as it is known in the business, 'naked short selling.'

 

Besides HFT and 'naked shorts' banks are only executing paper trading when it involves commodities and never take possession of the physical commodity when the contract expires. Trading on margin is an age old practice and until recently, anyone trading a commodity was required to take possession when the contract expired. However, with the relaxed rules as instituted by the 'Commodities Futures Modernization Act' banks are now allowed to be under capitalized. The bankruptcy of Bear Stearns is a perfect example of being without sufficient capital to cover losses. E.g. lets say Bear Stearns was capitalized for trades at 10% and the market moved 15% against, then a margin call wiped out their capital and the company went belly up. The same thing is happening today with the derivative market which could very well be over 1 Quadrillion USD which are bets on bets on bets.......

 

http://www.nakedcapitalism.com/2013/03/worldwide-derivatives-market-estimated-as-big-as-1-2-quadrillion-as-banks-fight-efforts-to-rein-it-in.html

 

 

http://www.investopedia.com/terms/h/high-frequency-trading.asp

 

http://www.investopedia.com/terms/n/nakedshorting.asp

[ralis]

The derivative market inflates the original value of the asset in question to astronomical proportions.

[joeblast]

when the root of the system is fraud and counterfeiting,  you cant honestly speak of any sort of "fairness," because it went out the window in the 1620s  when the king of england went broke and the banks bailed him out in exchange for the issuance of money; it went out the window here in 1913 when the banks took over the issuance of money.

 

 

there's quite a difference between working your ass off and making money, and having had your great great great grandfather corner the system and introduce a parasitical siphon that will guarantee his entire family tree will never ever have to work, ever again, and can exert undue control over nations, often against their will.

 

 

the "market" as ralis said, is a complete joke, almost completely devoid of human traders these days, look at the floor of the stock market - years ago it used to be bustling with people, now it is nearly empty, and the algos churn out whatever they're   coded to churn (until they stop doing what their owners want, then they just pull the plug on it and manually enter some things.)

 

 

this is not a free market by any stretch of the imagination, so please....stop referring to what we have as a market, much less a free one, it is a managed and calculated system with a handful of MASSIVE siphons at the top.

 

when executives of a company resort to having to buy back their own stock just to boost their p/e ratio so that makes their bonuses go up....what the hell do they care, they are part of the strip mining operation.  meanwhile, let's get as many H1Bs as possible so we can hire 7 to do the job of 1 american.

[Karl]

The stock market is a rigged system for the big banks and that has been proven by such writers as Michael Lewis. 'High frequency trading' dominates the market in which a high volume of trades are executed every second by the same broker. Further, banks such as Goldman Sachs are able to monitor volume and positions on the NY Stock Exchange and use HFT to trade against any position or as it is known in the business, 'naked short selling.'

 

Besides HFT and 'naked shorts' banks are only executing paper trading when it involves commodities and never take possession of the physical commodity when the contract expires. Trading on margin is an age old practice and until recently, anyone trading a commodity was required to take possession when the contract expired. However, with the relaxed rules as instituted by the 'Commodities Futures Modernization Act' banks are now allowed to be under capitalized. The bankruptcy of Bear Stearns is a perfect example of being without sufficient capital to cover losses. E.g. lets say Bear Stearns was capitalized for trades at 10% and the market moved 15% against, then a margin call wiped out their capital and the company went belly up. The same thing is happening today with the derivative market which could very well be over 1 Quadrillion USD which are bets on bets on bets.......

 

http://www.nakedcapitalism.com/2013/03/worldwide-derivatives-market-estimated-as-big-as-1-2-quadrillion-as-banks-fight-efforts-to-rein-it-in.html

 

 

http://www.investopedia.com/terms/h/high-frequency-trading.asp

 

http://www.investopedia.com/terms/n/nakedshorting.asp

 

HFT isn't really the menace that people think it is. There is still a huge opportunity for long term investors and specialists. HFT is really internal competition rather than causing us all to pay more for goods, it effectively does the opposite. For those in the stock market it might be regarded as slightly dodgy but it's still fallible. It's only the current central bank/state intervention that is problematical.

[WisteriaWinds]

Economics is simply the study of how energy flows in nations. If my body was operating like our current system (to include the stock system) I would die soon...

[joeblast]

when you have folks setting up microwave links across the street from the exchange...

 

when normal folks can respond in seconds, in a race where microseconds matter...

 

they dont call  people still delusional enough to be in this market "muppets" for nothing.      

 

karl, it doesnt sound like you are familiar with the term "front running"

 

read some things like confessions of an economic hit man

[Karl]

when you have folks setting up microwave links across the street from the exchange...

 

when normal folks can respond in seconds, in a race where microseconds matter...

 

they dont call  people still delusional enough to be in this market "muppets" for nothing.      

 

karl, it doesnt sound like you are familiar with the term "front running"

 

read some things like confessions of an economic hit man

 

Yes, I'm very familiar with the term, but day traders can and do beat the Algobots. It's only if you are wedded to short term trades that things get tricky. Investment used to be long term and anyone truly 'investing' and not simply gambling is in it for the long term. COAEHM is actually wrong headed even if large chunks of it are true.

 

We don't have markets anymore anyway, the banks and the state took them over. They are effectively nationalised casinos run by a soviet style central planner. Those who are close to the FED get the new money for nothing and a guaranteed tip for increasing earnings. The FED and its plunge protection team are playing the same market. It's effectively a Ponzi scheme kept alive by the FED which is now beginning to creak savagely. I suspect they are worried about showing their hand until after Hillary is safely ensconced in the White House, but the financials are so bad that I doubt they will get much further before we get QE4, NIRP or both. I reckon it's close to the end game and we will see a dollar collapse.

[joeblast]

spot on, only those right next to the spigot are getting the benefit

but not nearly the benefit of those that open and close the spigot.

[ralis]

The 'too big to fail banks' have obtained one big advantage by merging investment and commercial banking (the repeal of Glass Steagall allowed this merger). E.g. Goldman Sachs can borrow almost unlimited money from the Federal Reserve at discount rates of far less than 1% and use that capital for gaming the market. Or in other words, an exclusive high stakes casino. With that large of a bankroll, Goldman can move the market in their favor.

 

An individual investor has better odds on the worst bet in the casino which is 'The Big Wheel' than on Wall Street.

 

 

[ralis]

Michael Lewis is an excellent place to begin educating oneself as to the complex machinations on Wall Street.

 

http://www.amazon.com/Big-Short-Inside-Doomsday-Machine/dp/0393338827/ref=la_B000APZ33E_1_1?s=books&ie=UTF8&qid=1463241031&sr=1-1

 

http://www.amazon.com/Liars-Poker-Norton-Paperback-Michael/dp/039333869X/ref=la_B000APZ33E_1_3?s=books&ie=UTF8&qid=1463241031&sr=1-3

[Karl]

The 'too big to fail banks' have obtained one big advantage by merging investment and commercial banking (the repeal of Glass Steagall allowed this merger). E.g. Goldman Sachs can borrow almost unlimited money from the Federal Reserve at discount rates of far less than 1% and use that capital for gaming the market. Or in other words, an exclusive high stakes casino. With that large of a bankroll, Goldman can move the market in their favor.

 

An individual investor has better odds on the worst bet in the casino which is 'The Big Wheel' than on Wall Street.

 

 

 

GS is a red herring used by the politicians and bankers to cover the real issue which is fiat money backed by fresh air, the wall st -FED-troika monopoly, fractional reserve banking and Government policy.

 

The problem is not 'regulation' but that there is a need for regulation (and there is more regulations and regulators in banking than in any other trade by a huge factor). The link between state and commerce has to be cut, the printing of unbacked fiat regarded as the fraud it really is. Banks must be allowed to fail and the creditors/depositors must lose their shirts. Anyone who wishes to insure their savings can take out a policy themselves.

 

As always it's Government that created the conditions and legalised the fraud. They wanted to untie the golden handcuffs in order to sucker the electorate into getting free stuff by mortgaging tomorrow's production. The state gave themselves a credit card and mortgaged the people's future as a result.

 

 

[joeblast]

While Glass-Steagal is but a piece, it is absolutely not a red herring, it was exactly the fuel needed to blow more speculative bubbles, because they werent happening enough for the counterfeiters liking.

 

Those who do the bribing, dont exculpate them.  The government shares in the blame in a sense, but that leaves out the fact that the government was infiltrated to begin with, which was what enabled the blank checkbook bribing wars market manipulation, et al

[Karl]

While Glass-Steagal is but a piece, it is absolutely not a red herring, it was exactly the fuel needed to blow more speculative bubbles, because they werent happening enough for the counterfeiters liking.

 

Those who do the bribing, dont exculpate them.  The government shares in the blame in a sense, but that leaves out the fact that the government was infiltrated to begin with, which was what enabled the blank checkbook bribing wars market manipulation, et al

 

Well Joe, I'm going to ask you to provide proof that it was the repeal of the GS caused the financial crisis/ actually it was only ever a partial repeal which many commercial banks never took advantage of - plus of course neither Europe or Japan ever had GS.;-)

 

Then I will prove to you why it wasn't GS at all, but Government policy, Government regulators/FDIC and poor commercial bank management that caused the problem.

[ralis]

Well Joe, I'm going to ask you to provide proof that it was the repeal of the GS caused the financial crisis/ actually it was only ever a partial repeal which many commercial banks never took advantage of - plus of course neither Europe or Japan ever had GS.;-) Then I will prove to you why it wasn't GS at all, but Government policy, Government regulators/FDIC and poor commercial bank management that caused the problem.

 

Glass-Steagall was created to separate commercial banking from investment banking. Before the act was created, banks gambled with their clients deposits on risky bets. The same thing is happening here in the USA.

[liminal_luke]

 

I, for one, have no problem with people getting money by investing in stocks, winning the lottery, or inheriting it. Some people are luckier than others, this is not going to change any time soon. And mind you, there are many ways in which one may or may not be priviledged; having money is no guarantee for happiness. But it allows you to do good for yourself and others. Nothing wrong with that.

 

While there´s an urgent need to work for economic justice on many different levels, government regulations will never entirely succeed at smoothing over the inherent unfairness of life.  There are several people on this board, for instance, who are much smarter than me -- and they did nothing to deserve it!  It was just their genetics or maybe what their mom ate while pregnant or something.  And that intelligence allows them to understand things and do things I can´t.  (Not that I think I´m stupid -- it´s all relative.)

 

On the other hand, I grew up in the United States to middle-class parents.  As a kid I took piano lessons.  My mom had the free.time, energy and goodwill to drive me to diving team practice every weekday during the summer.  That´s not fair either.  Where I live now in Mexico very few kids are so privileged.  

 

Part of coming to terms with life is accepting this kind of inherent unfairness, while working to expand everybodies opportunities as best we can.

[Karl]

Glass-Steagall was created to separate commercial banking from investment banking. Before the act was created, banks gambled with their clients deposits on risky bets. The same thing is happening here in the USA.

 

Yes, that's why they said it needed to be created. I can show that they either deliberately, or ignorantly created GS as a solution to a problem that never existed. I suspect the former, but I can't prove it. I can only prove it was the wrong solution because the real issue remains to this day.

 

 

What caused the 2009 crash Ralis ? Which banks had to be bailed out ? Bearing in mind that the FDIC does not apply to investment banks only to the commercial banks.

[joeblast]

ever heard of the term "corzine'd"

[Karl]

ever heard of the term "corzine'd"

 

Just produce the facts and evidence that it was GS that was responsible for the crash. It should be simple to find the evidence if it's well understood I think ;-)

[thelerner]

Inflation will steadily erode your saving by 2 to 5% a year (lately its been low).  Taxes, medicare, social security will take a large bite, 20 to 40% from every paycheck you get.  Sales tax will also take a big bite out of your earnings. 

 

In other words on our earning we pay a shitload of taxes and whatever you do save will be eroded by inflation.   Intelligent investing, in a diversified portfolio, or the SP500, DOW or similar index will over the long run (15 years plus) tend to earn you 8%+ on your money.  Keep you nicely ahead of inflation, even taking into account the inevitable depressions and recessions. 

 

 

Its good to fight for social justice, but it doesn't make sense to work hard and earn $100,000 and see its buying power fade to $20,000 versus growing to 3 or $400,000,  40 years later when you want to retire.

Edited May 14, 2016 by thelerner

[joeblast]

Just produce the facts and evidence that it was GS that was responsible for the crash. It should be simple to find the evidence if it's well understood I think ;-)

its you're not knowledgeable about the operations of the squid, I'm not the guy to teach you about it

[ralis]

Impunity, impunity, ad infinitum.

 

http://www.democraticunderground.com/12511964672

 

http://content.time.com/time/specials/packages/article/0,28804,1877351_1877350_1877341,00.html

 

 

https://www.bostonglobe.com/opinion/2016/05/12/the-age-impunity/LHBxamqFENCs3W6lvWnCIJ/story.html

 

 

 

Impunity is epidemic in America. The rich and powerful get away with their heists in broad daylight. When a politician like Bernie Sanders calls out the corruption, the New York Times and Wall Street Journal double down with their mockery over such a foolish “dreamer.” The Journal recently opposed the corruption sentence of former Virginia governor Bob McDonnell for taking large gifts and bestowing official favors — because everybody does it. And one of its columnists praised Panama for facilitating the ability of wealthy individuals to hide their income from “predatory governments” trying to collect taxes. No kidding.

snip

Paulson and Goldman constructed and marketed a portfolio of toxic assets to sell to unwitting investors so that Paulson could bet against the portfolio. Goldman and Paulson thereby turned the sucker investors’ quick $1 billion loss into an equivalent $1 billion gain for Paulson, with Goldman collecting on fees. The SEC fined Goldman but left Paulson untouched. As one disillusioned SEC investigator put it: The SEC is “an agency that polices the broken windows on the street level and rarely goes to the penthouse floors.” Yet Harvard was delighted last year to take $400 million of Paulson’s ill-gotten gains, leave Paulson with the rest, name its engineering school after Paulson, and declare Paulson to be “the epitome of a visionary leader.”

Impunity. Paulson remains a much-celebrated figure on Wall Street. He has many kindred spirits, such as his partner in crime, Goldman CEO Lloyd Blankfein, who has described himself as just a banker “doing God’s work.” Or consider JP Morgan CEO Jamie Dimon, whose bank has paid well over $30 billion in fines while Dimon remains CEO with a $27 million salary for 2015. The hedge-fund industry itself is a case study of impunity. With few exceptions, it is domiciled in tax and secrecy havens, enjoys crass tax breaks brokered by cronies in Congress (such as Wall Street Senator Chuck Schumer), and pays itself billion-dollar-plus paychecks even while leaving investors with below-market returns or outright losses over the years.

The recourse to cheating within the financial industry now seems to be deeply ingrained, part of the corporate culture, and enabled by the prevailing impunity.........

Edited May 15, 2016 by ralis