On February 1, 2013, Walter Hamilton and Andrew Tangel write in the Los Angeles Times that the Dow Jones index has more t than doubled from its crisis-era low and is nearing an even more impressive mark––a new all-time high.
Whether this has to do with the reality of the health of businesses is not addressed. The stock market deals in secondhand securities, which essentially translates to a gaming casino. Throughout the article the term “investor” is used instead of “gambler” and “perceived value” instead of “bet.”
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.
Conventionally, most people do not have the right to acquire productive capital with the self-financing earnings of capital; they are left to acquire, as best as they can, with their earnings as labor workers. This is fundamentally hard to do and limiting. Thus, the most important economic right Americans need and should demand is the effective right to acquire capital with the earnings of capital. Note, though, millions of Americans own diluted stock value through the “stock market exchanges,” purchased with their earnings as labor workers, their stock holdings are relatively miniscule, as are their dividend payments compared to the top 10 percent of capital owners.
What historically empowered America’s original capitalists was conventional savings-based finance and the pledging or mortgaging of assets, with access to further ownership of new productive capital available only to those who were already well capitalized. As has been the case, credit to purchase capital is made available by financial institutions ONLY to people who already own capital and other forms of equity, such as the equity in their home that can be pledged as loan security––those who meet the universal requirement for collateral. Lenders will only extend credit to people who already have assets. Thus, the rich are made ever richer, while the poor (people without a viable capital estate) remain poor and dependent on their labor to produce income. Thus, the system is restrictive and capital ownership is clinically denied to those who need it.
Thus, as binary economist Louis Kelso asserted: “The problem with conventional financing techniques is that they address only the productive power of enterprise and the enhancement of the earning power of the rich minority. Sustaining or increasing the earning power of the majority of consumers who are dependent entirely upon the earnings of their labor, or upon welfare, is left to government or governmentally assisted redistribution of income and to chance.”
To reverse this trend requires that we apply the logic of corporate finance, which uses self-financing asset-backed credit for productive uses to grow the economy. People invest in capital ownership on the basis that the investment will pay for itself. This is were the government can play a significant role in providing to EVERY American the financial mechanisms to facilitate loans specifically for productive capital investment without the requirement of “past” savings.
Productive capital investment and thus economic growth expansion occurs when there are “customers with money” to purchase the extended products and services created. Capital formation transactions are monetized as determined by the expertise of corporate management and banks––that each transaction is viably feasible so that there is virtually no risk. What is needed is to implement financing tools and economic proposals to correct the imbalance between production and consumption at its source, and broaden ownership of productive capital in conformance with private property free market principles. Thus, setting ourselves on a path to prosperity, opportunity, and economic justice requires that we finance FUTURE productive capital growth simultaneously with creating new capitalists owners who will derive dividend income to make them good “customers with money.”
The solution is to focus on OWNERSHIP CREATION whereby EVERY American can acquire private, individual ownership in FUTURE income-producing productive capital investment without the need to limit the financing to past savings and/or requiring workers to reduce their consumption incomes to become owners.
We need aggressive economic growth while simultaneously broadening private, individual ownership of FUTURE productive capital formation, enabling EVERY American to acquire via self-payment loans a viable income-producing capital estate over time, and thus pave the way for EVERY American to “retire” and “do more of what you want and less of what you don’t.”
There is a solution, which will result in double-digit economic growth and simultaneously broaden private, individual ownership so that EVERY American’s income significantly grows, providing the means to support themselves and their families with an affluent lifestyle. The Just Third Way Master Plan for America’s future is published at http://foreconomicjustice.org/?p=5797.
http://www.latimes.com/business/la-fi-dow-14k-20130202,0,459541.story
http://www.latimes.com/business/la-fi-wall-street-20130202,0,6149945.story
