On April 16, 2013, Eric Zuesse writes in The Huffington Post:
Tamara Keith of National Public Radio reported, on Tuesday, April 16th, that “Congress moved to undo large parts of the STOCK [Stop Trading On Congressional Knowledge] Act last week.” This had been the law that was passed just a year ago, and which President Obama signed into law at a White House ceremony with TV cameras on and great fanfare. The law – which had been pushed by progressive Democrats since 2006, and which finally became law on 4 April 2012 – required members of Congress and their staffs, and the Executive Branch, to avoid insider trading. Until this law was passed, buying or selling stock on the basis of insider information had been fully legal for these federal officials, but not for anyone else; and the STOCK Act was supposed to end that and prohibit political insiders from buying and selling stock on the basis of their privileged knowledge of upcoming legal changes.
That investment-advantage they enjoyed had been substantial: one study by economist Alan Ziobrowski, “Abnormal Returns from the Common Stock Investments of the U.S. Senate,” showed that U.S. Senators’ stock-investments outperformed the general market by about 12% per year; and another study by him, “Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives,” showed that U.S. Representatives’ stock-investments outperformed the general market by about 6% per year. In other words, the investments of these people were growing at around twice the normal rate. Members of Congress were probably making more money from their personal investments than they did from their official salaries. The bill that Obama quietly signed into law on 15 April 2013 made the STOCK Act that he had signed the year before virtually unenforceable. Members of Congress can thus resume drawing a major part of their incomes from cheating outside investors, who don’t know the things that these officials are privileged to know.
NPR continued: “In the House, Majority Leader Eric Cantor, R-Va., shepherded the bill through” at a time when “many members had already left for the weekend or were on their way out. The whole process took 30 seconds. There was no debate.” Then, at the White House, “when the president signed a bill reversing big pieces of the law, the emailed announcement was one sentence long. There was no fanfare last week, either, when the Senate and then the House passed the bill in largely empty chambers using a fast-track procedure known as unanimous consent. … ‘There weren’t too many members of Congress who were aware of this legislation,’ says Craig Holman, the government affairs lobbyist for Public Citizen.”
Basically, only the leadership knew what was happening. This included the President. He knew what was in the legislation, and that’s why he signed it so inconspicuously (by contrast to the way that he had signed the STOCK Act into law a year before).
Not every government official was corrupt, but the “right” ones were. Perhaps that’s how they had risen to become the “right” ones: the leaders of Congress are chosen by the members of Congress, and represent those members – nobody else (except the financial backers of their local re-election campaigns).
This is how institutionalized corruption operates. But President Obama didn’t have to sign this bill; he supposedly represented the public, not the people on Capitol Hill; he could simply have vetoed it, and given that vetoing-event the same TV-fanfare exposure he had given to his signing of the STOCK Act a year earlier; this would have been a very popular thing for him to do, and it would have been in keeping with all of his campaign rhetoric, upon the basis of which he had won the White House. But corruption has instead been rampant during his Presidency; and his decisions – both personnel and policy – have largely assisted that, as happened here: he chose to help corrupt members of Congress.
Based on this reporting, it appears that President Obama and the powers in the United States Congress want the benefit of the stock market gambling casino rig to enrich their OWNERSHIP portfolios. Yet NONE of these people are advocating for ordinary, regular, hard-working Americans to become OWNERS! And to empower ALL Americans to invest in real economic growth with stock portfolios comprised of diversified major American corporations with newly issued stock acquired with the earnings of the productive capital investments, without having to use past savings, which the majority of Americans do not have.
No one is addressing whether Dow Jones gains have to do with the reality of the health of businesses. The stock market deals in secondhand securities, which essentially translates to a gaming casino. Wall Street has convinced us to see ourselves as “investors” instead of “gamblers” and “perceived values” instead of “bets.”
The pre-tax yield of corporate assets of prosperous companies varies from 25 to 60 percent. The yield on secondhand securities is around five or six percent. Those “investing” (gambling) in the stock market are hoping for capital gains to increase the amount of money put out to purchase stock. But don’t forget, that’s a zero-sum game; for every gainer, there’s a loser. Wall Street doesn’t do anything in the way of producing products and services. It just plays games with your dough. And when you take it out in pensions, you’re going to get less than the company put in for you. You have to; that’s the dynamics of it.
The other reality is that for the majority of Americans purchasing stock is not an option because they do not have sufficient income or savings to risk––the the better bets on stock cost in the hundreds of dollars for a single share. And don’t expect dividend income because companies overwhelming finance FUTURE growth through debt or retained earnings financing, neither of which creates any NEW OWNERS. Capital credit is restricted to the purchase of assets that are expected to pay for themselves out of the revenue generated from the capital investment, which it financed, and therefore these assets are expected to earn a continuing flow of profit for whoever owns the assets. Thus, because no new owners are created as a result of issuing and selling new stock the present ownership class continues to enrich themselves by monopolizing capital ownership of America’s productive capital assets.
More accurately this is not about investment but instead SPECULATION. But the media continues to framed the term as investment when related to the stock exchanges. And the President and the Congress is seeking advantages to enable them to be better speculators.
Stock purchased from a company and in which the company receives the (typically past savings) money from the purchase in order to produce things is a TRUE INVESTMENT.
The stock market operates on the secondary level whereby stock is purchased from another stockholder who receives the cash from the transaction, which when held for sale at a future time is speculation.
In the first case the stock becomes speculative as soon as that buyer decides to hold it for appreciation but it is important to understand that the money received by the producer company is used to build new asset activity or replace old assets.
In the case of speculative stock buying and selling, this activity does not provide gain to the producer company (even if the price of the stock offered initially (issued and sold) goes up, but instead enriches the holder of the asset (stock). Of course, if the producer company decides to later issue new stock the company owners will receive more money per share of stock issued.
Speculators do not add to economic activity, at least primarily. Perhaps members of society will feel more optimistic with the stock shares (market) going up, and perhaps they will be looser with their savings to purchase products and services. Unless, however, the producer company has new cash to build products and extend services in demand, then speculation will not help. Eventually, the speculators might sell their stock or other asset and use some of that to purchase consumer items, but that is a tenuous trail to economic progress and again it does not assure the producer company having the cash to actually build more things.
Of course, if the money from these sources were sitting in the bank, the producer company could borrow money needed for new production.
What is needed is to implement the Capital Homestead Act.
Right now the Federal Reserve creates money by loaning it to banks, who re-loan it multiple times because of fractional banking rules. With Capital Homesteading, money would be created by loaning it directly to citizens via banks at near-zero interest to invest in FUTURE wealth-creating, income-generating (full dividend payout) productive capital assets formed by producer companies. To build real wealth and also phase out our near-defunct social security scheme, the new full-reserve money would go into a long-term retirement account to be invested in dividend-paying, asset-backed shares of corporations. That way, money power would be spread to all citizens. The middle class would be invigorated using the principle of compounding interest, instead of being decimated by mushrooming public and personal debt.
The Federal Reserve could play a more positive role, removing artificial barriers to equal citizen access to acquiring and owning productive capital wealth. By creating asset-backed money for production, supported by growth-oriented tax policies, the Federal Reserve could truly help promote shared prosperity in a market system.
Support the Agenda of The Just Third Way Movement at http://foreconomicjustice.org/?p=5797
Support Monetary Justice at http://capitalhomestead.org/page/monetary-justice
Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm
For solutions also see “Financing Economic Growth With ‘FUTURE SAVINGS’: Solutions To Protect America From Economic Decline” at NationOfChange.org http://www.nationofchange.org/financing-future-economic-growth-future-savings-solutions-protect-america-economic-decline-137450624 and “The Income Solution To Slow Private Sector Job Growth” at http://www.nationofchange.org/income-solution-slow-private-sector-job-growth-1378041490.
http://www.huffingtonpost.com/eric-zuesse/is-the-obama-administrati_2_b_3094454.html
