Gary Reber Comments:
Stock buybacks is a scam that results in further concentrated capital asset ownership.
Stock (certificates of ownership) buybacks ALWAYS concentrate ownership among those who are the major stockholders of a public business corporation. They buy back from those who have sold their stock holdings on the market exchanges, which they originally bought using past savings, accumulated by denying personal consumption.
Stock buybacks are tax-free exchanges to the corporations and their remaining stockholders, and are capital gains to the sellers.
At first glance a share buyback sounds good for investors. It puts upward pressure on the value per share, allowing anyone with a sizable stake in the company to make out pretty well.
However, there is the problem of buying and selling shares in a corporation as if ownership itself is a commodity to be bought and sold. In a sense, that is right, for you can buy or sell some or all rights to something, and it is legitimate to deal in such contracts, but to buy and sell contracts in an effort to manipulate the value of the “underlying” — as the consideration in such contracts is called — is considered a form of “peculation,” or theft of money entrusted to you.
One of the problems with selling shares to make money on them is that you are no longer an owner of the shares. You are a former owner. The best you can do is take the money and see if you can find an equivalent investment in something else.
But, that’s not even the main problem in a share buyback. It’s the money . . . as in, whose money is it? Corporations use retained earnings entitled to the shareowners to buy shares in themselves from shareholders, meaning the owners of the corporation.
It doesn’t take a genius to see what’s going on here. The shareholders own the corporation. That means that they own what the corporation owns, which includes the cash that will be used to buyback the shares.
For example, corporation “Phat” will be buying shares from shareholders with money that already belongs to the shareholders! It’s as if someone borrows $100.00 from you, and pays it back with $100.00 he collected on your behalf from someone else. Instead of the $200.00 that is due you, you only get $100.00.
Are you getting the picture? Instead of paying out the cash that belongs to the shareholders to the shareholders in the form of dividends, the corporations are going to use cash that belongs to the shareholders to buy shares from the shareholders.
Stated again, the so-called excess cash belongs not to the corporation, but to the owners of the corporation, that is, the shareholders. In effect, the corporation is using money that belongs to the shareholders to purchase shares belonging to the shareholders. It’s as if a robber takes $100 from your wallet and buys your watch for $100, paying for it with the $100 he just stole from you. Because the money paid to you for the watch already belonged to you, you were in effect robbed of $100 even though you ended up with $100, coming up short a watch worth $100.
This scam relates to any corporation buying back shares.
Stock buybacks do not stimulate the economy’s growth. Instead stock buybacks further concentrate wealth-creating, income-producing stock ownership among the already wealthy capital ownership class, who owns the productive capital assets of our nation, and who will continue to accumulate more and more capital ownership and OWN America as the economy grows, even at a limping pace as it does now.
Americans need to WAKE UP and demand that the monetary system is reformed to empower EVERY child, woman, and man to acquire steadily over time a significant portfolio of full-voting and full-earnings payout stock representing new, real investment in the growth of the productive sector of the economy.
Such acquisition can be accomplished using insured, interest-free capital credit, repayable out of the full future earnings of the investments, without the requirement of past savings.
Risk premiums would be included in the capital credit transaction fees, but no interest, with the first layer of risk taken by commercial credit insurers, which would be backed by a new government corporation –– the Capital Diffusion Reinsurance Corporation (CDRC) –– through which the loans could be guaranteed. The CDRC would reinsure any portion of any financing risk assessed as reasonable and insurable but not already insured by the commercial capital credit insurance underwriters. In establishing the CDRC, the federal government would not be undertaking a new responsibility but merely simplifying and rationalizing an existing one. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.
The Capital Diffusion Reinsurance Corporation would function similar to the Federal Housing Administration, generally known as “FHA”, which provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. The FHA insures mortgages on single family and multifamily homes including manufactured homes. While pay-downs on home mortgages require a separate source of income, capital credit for productive capital formation is self-liquidating, with the earnings from the investment the source of the pay-down.
The fact is money power rules. When money power is broadly distributed in the hands of the citizens, the people shall rule. Ensuring that money power is broadly distributed should be the primary role of the government, facilitated by the Federal Reserve.
The Federal Reserve Board is already empowered under Section 13 of the Federal Reserve Act to reform monetary policy to discourage non-productive uses of credit, to encourage accelerated rates of private sector growth, and to promote widespread individual access to productive credit as a fundamental right of citizenship. The Federal Reserve Board needs to re-activate its discount mechanism to encourage private sector growth linked to universal capital ownership opportunities for all Americans.
