Investing in Precious Metals 101 Ad

Capitalism without gambling: It’s not only possible. It will reduce speculative waste in the economy.

Login or register to post comments Last Post 3687 reads   23 posts
Viewing 10 posts - 1 through 10 (of 23 total)
  • Tue, Feb 23, 2010 - 04:31pm

    #1
    kmarinas86

    kmarinas86

    Status Bronze Member (Offline)

    Joined: Dec 29 2008

    Posts: 60

    count placeholder

    Capitalism without gambling: It’s not only possible. It will reduce speculative waste in the economy.

Trading derivatives and the rally-governed stock market should be abolished. All that is needed is a corporate bonds trading market. Capitalism without gambling: This is a possibility!

  • Tue, Feb 23, 2010 - 07:52pm

    #2
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Capitalism without gambling: It’s not only possible. It …

 

Hope that happens, enough with derivatives already.  Wall Street has shown it cannot be responsible with those dangerous instruments.

 

  • Tue, Feb 23, 2010 - 08:29pm

    #3
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Capitalism without gambling: It’s not only possible. It …

why only a corporate bond market?  Can you explain how the bond market is different than the equity or derivitave markets regarding your point?

  • Tue, Feb 23, 2010 - 08:54pm

    #4
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Capitalism without gambling: It’s not only possible. It …

Do you think alcohol or gambling are good for society or should we abolish them also?  If you don’t believe in the stock market, then don’t personally invest in it.  Why do you claim the right to tell others what they should and should not do?

What about equity?  Small firms are effectively locked out the debt market and need the equity market to gain capital.

I don’t think the problem is debt, equity, or even exchange traded derivatives.  The real problem is leverage and to big to fail.

  • Tue, Feb 23, 2010 - 09:33pm

    #6
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Capitalism without gambling: It’s not only possible. It …

“Do you think alcohol or gambling are good for society or should we abolish them also?”

Alcohol and gambling are social countermeasures to injustices in society. So we should not abolish those.

It is a bad analogy in any case, as stock investing is hardly a social countermeasure to injustices in society.

“If you don’t believe in the stock market, then don’t personally invest in it.”

You ordered me to not do something I *quit* doing. So?

“Why do you claim the right to tell others what they should and should not do?”

If we all agreed to do only what we agreed to do, there would be no debate.

“What about equity?  Small firms are effectively locked out the debt market and need the equity market to gain capital.”

Compared to larger firms, small firms do not benefit as much from the equity market, so no wonder they have a problem entering the debt market that demands lower risk.

“I don’t think the problem is debt, equity, or even exchange traded derivatives.  The real problem is leverage and to big to fail.”

Leverage and too big to fail are not even the cause of themselves; that’s circular reasoning. The root of the fungus is extreme overvaluation and undervalution. Any philosophy that attempts to defend systemic risk by saying its consequence is a problem is shooting itself in the foot.

  • Tue, Feb 23, 2010 - 09:37pm

    #5
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Capitalism without gambling: It’s not only possible. It …

Bonds are more secure investments. A company can issue a bond to develop capital, so eliminating stocks from the equation does not eliminate CAPITALism outright. Bond rating analysis would be simplified. The profits would be based more on logic and fiscal conservative principles, rather than the vacuousness of the media. Stocks overvaluation is more severe than bond overvaluation. Without derivatives, it is harder to speculate on bonds than on stocks. Uncertainty is reduced, risk is attenuated. Auditing becomes easier. Bonds are ways we can invest in businesses without much interference from a financial intermediary. Also consider that the amount of corporate bonds that can be issued may be greater due to lower risk, which in turn leads to lower prices for bond issuers (in the form of interest). So for the same return on the market, which is a given by long-term profits, more money can be lended to the corporations.

So what we have is the same benefits of capitalism without the gambling and vacousness of stocks and derivatives. Now, it is still possible to trade bonds, so in a way it does act like a “derivative” but in this case the magnitude of risk appears no different than your average loan. It is harder for media to manipulate bond value vs. stock value. This makes it a much safer investment for the long-term.

  • Tue, Feb 23, 2010 - 10:05pm

    #7
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Capitalism without gambling: It’s not only possible. It …

Capitalism without gambling (I would call it speculation) is not possible.  Every business venture has risk.  In order for money and idea to come together to form business, many creative solutions have been used.  Bartering has risk, bonds have risk, growing food as a farmer has risk.

Saying bonds have less risk than equities across the board is absurd.  I can show you plenty of stocks that have had less risk in the past year based on market fluctuations than US treasuries have.  Look at the first half of this year – treasuries declined 30% from their highs.  A six month decline in value of 30% in what historicaly has been called the safest investment in the world doesnt do much for your argument.

For a business to start or expand, ideas must come together with capital.  If easy methods of raising capital fail (say a loan or bond from your local bank), the group with the idea needs to get creative in order to raise money.  If you leave them with no other options, then you kill captialism.  You kill risk taking and medical, scientific, educational, and environmental breakthroughs all but die.

Derivitive markets, most of them anyway, serve huge risk reduction tools for many businesses.  Much of the options and futures markets are utilized to reduce individual risk, and thus result in lower system risk.  Goes211 is right – the issues are that extreme leverage was legalized on top of killing the separation of banks and prop trading. 

  • Tue, Feb 23, 2010 - 10:16pm

    #8
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Capitalism without gambling: It’s not only possible. It …

[quote=goes211]

Do you think alcohol or gambling are good for society or should we abolish them also?  If you don’t believe in the stock market, then don’t personally invest in it.  Why do you claim the right to tell others what they should and should not do?

What about equity?  Small firms are effectively locked out the debt market and need the equity market to gain capital.

I don’t think the problem is debt, equity, or even exchange traded derivatives.  The real problem is leverage and to big to fail.

[/quote]

I agree with you.  I don’t have a  problem if a firm wants to trade derivatives, but just like alcohol and gambling, when your firm goes under due to reckless behavior, don’t come looking to me to bail you out.  Don’t steal my cash to go buy a pint of vodka or play roulette, and don’t steal my cash so you can go try to make your money back on the exchange floor, prop up your firm and then pay your execs a billion dollar bonus.  Let the free markets, be just that, free.  But also adhere to the principle what makes freedom so great, with freedom comes responsibilty and ownership for one’s choices whether they be wise or foolish.

  • Wed, Feb 24, 2010 - 12:08am

    #10
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Capitalism without gambling: It’s not only possible. It …

[quote=kmarinas86]

“Do you think alcohol or gambling are good for society or should we abolish them also?”

Alcohol and gambling are social countermeasures to injustices in society. So we should not abolish those.

It is a bad analogy in any case, as stock investing is hardly a social countermeasure to injustices in society.
[/quote]

So getting drunk and gambling in Vegas is OK but investing in stocks is to be outlawed?  Interesting perspective.

[quote=kmarinas86]

“Why do you claim the right to tell others what they should and should not do?”

If we all agreed to do only what we agreed to do, there would be no debate.

[/quote]

I do not agree to let a busybody like you tell me what I can and cannot do.  Therefore you have not answered the question.

[quote=kmarinas86]

“What about equity?  Small firms are effectively locked out the debt market and need the equity market to gain capital.”

Compared to larger firms, small firms do not benefit as much from the equity market, so no wonder they have a problem entering the debt market that demands lower risk.

[/quote]

I think you are confusing the primary and secondary markets.  Also as others have mentioned, if you think the debt markets are less risky than the equity market, you are making some big assumptions about market conditions.
[quote=kmarinas86]

“I don’t think the problem is debt, equity, or even exchange traded derivatives.  The real problem is leverage and to big to fail.”

Leverage and too big to fail are not even the cause of themselves; that’s circular reasoning. The root of the fungus is extreme overvaluation and undervalution. Any philosophy that attempts to defend systemic risk by saying its consequence is a problem is shooting itself in the foot.

[/quote]

Leverage is what made the system unstable and susceptible to systematic risks.  To big to fail is what made the system unfair in that it rewarded those that made large amounts of money on the way up and denied them the final consequences of their actions at everyone elses expense.  By bailing out those that took risks in the first place, you are increasing the extremes in overvaluation that you claim to be concerned about.

  • Wed, Feb 24, 2010 - 12:13am

    #9
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1612

    count placeholder

    Re: Capitalism without gambling: It’s not only possible. It …

[quote=rickets]Capitalism without gambling (I would call it speculation) is not possible.[/quote]

Not literally. Metaphorically it is. I call it the deliberate reduction of systemic risk. The premise of the maker of this site (Chris Martenson) is that such system risk should be avoided. The only way to avoid it is to cut down the risk, unless you are able to leave the system (you can’t leave the world economy can you?). He attributes a big part of the problem (Economy) to exponential interest. We know this ultimately arises due to the creation of money as debt. Bryon Dale (author of the Minnesota Transportation Act) has a good explanation of this.

[quote=rickets]Every business venture has risk.  In order for money and idea to come together to form business, many creative solutions have been used.  Bartering has risk, bonds have risk, growing food as a farmer has risk.[/quote]

Risk cannot be literally eliminated. It can be reduced.

[quote=rickets]Saying bonds have less risk than equities across the board is absurd.[/quote]

Some equities are less risky than some bonds, and some politicans are smarter than Bill Gates. So? On average, bonds are less risky than stocks. The reason why that is so, is because equity has a inherent risk greater than bonds, its just that some equities are managed really well and some bonds are managed really bad. So?

[quote=rickets]I can show you plenty of stocks that have had less risk in the past year based on market fluctuations than US treasuries have.[/quote]

The government does not know how to invest money properly. It is increasingly getting worse. If US treasuries were all stocks, it would be easier to bail out on them. Stock market crashes are tougher=[size*frequency] than bond market crashes—common sense.

[quote=rickets]Look at the first half of this year – treasuries declined 30% from their highs.  A six month decline in value of 30% in what historicaly has been called the safest investment in the world doesnt do much for your argument.[/quote]

Red Herring. The US government is not like the rest of the economy. The government’s closest relative is the financial industry. By whatever means it is financed, it is no coincidence in my mind that government today is a riskier investment than just a few years ago. A fool would think otherwise.

[quote=rickets]For a business to start or expand, ideas must come together with capital.[/quote]

No one is disputing that. We both share this premise.

[quote=rickets]If easy methods of raising capital fail (say a loan or bond from your local bank), the group with the idea needs to get creative in order to raise money.[/quote]

Initially loans and bonds are easier ways of raising capital. But if your firm can afford it, equity capital can bring more bang for the buck. The equity market gives privileges to mature companies that no longer require as much innovation as before to maintain its status.

[quote=rickets]If you leave them with no other options, then you kill captialism.  You kill risk taking and medical, scientific, educational, and environmental breakthroughs all but die.[/quote]

A slippery slope fallacy and a non sequitur. Equity markets provide more privileges to big business than small business, so obviously the innovation-based companies have a harder time competing with the giant cash cows. Risk taking in the form of medical, scientific, educational, and environmental breakthroughs have more value than innovations in finance. Such developments in the advancement of human capabilities should be served by finance, not the other way around. In the long-term, the finance sector profits just as quickly as any other sector. For the average growth of all other industries to be continously exceeded by the growth of the financial system, it would require a massive number of legal contracts to be violated. The trickle down effect is the increase in fraud, resulting in taxing increases, debt mismanagement, not to mention other forms of misdemeanor and crime.

[quote=rickets]Derivitive markets, most of them anyway, serve huge risk reduction tools for many businesses.  Much of the options and futures markets are utilized to reduce individual risk, and thus result in lower system risk.  Goes211 is right – the issues are that extreme leverage was legalized on top of killing the separation of banks and prop trading.[/quote]

Reducing individual risk in proprietary ways does nothing to reduce the risk of the whole system. Where is your accounting for your financial derivatives? It does cost more money to maintain the system of financial derivatives, so it is not logical for there to be less risk! How do you increase the average return of derivatives? Two ways, neither which make long-term sense:

1) An economy getting richer by betting on itself, just like a person getting rich by writing himself checks.

2) A Ponzi scheme.

The overvaluation of derivatives on balance sheets, even to this day, is so large it is astronomical. There ARE diminishing returns on liquidity, especially when it is more about gains than profits.

Viewing 10 posts - 1 through 10 (of 23 total)

Login or Register to post comments