Panic was everywhere at the NYSE on Wednesday, when the stock market dove by more than 460 points.
On October 18, 2014, Danielle Kurtzleben writes on Vox:
If you pay any attention to the economics news, you know the US stock market stopped being its usual chipper self over the last month. Economic uncertainty in Europe and the end of the Fed’s QE3 program, which has helped to prop up stock prices, are two factors that have sent stocks falling in recent weeks. The Dow Jones Industrial Average is currently down around 900 points from where it was a month ago — not huge, but a reversal in the index’s relentless, three-year climb.
But for all the fearful questions about whether a market correction is coming, it’s important to take some perspective: the stock market’s latest oscillations and whatever crashes might be on the way will only directly affect around half of Americans, and their biggest effects will be on the richest people.
Federal Reserve data compiled by CNBC shows that the share of Americans who own stocks has hovered at around 50 percent for 15 years.
And of course, not all of those people own the same amount of stock. As with incomes and wealth in general, stock ownership is highly concentrated at the top (and has been for a while), as this chart from the Economic Policy Institute shows. The bottom 80 percent of Americans by wealth only own just over 8 percent of all stock owned by US households.
It’s true that a slowdown in the stock market isn’t exactly great news — some economists consider stocks a leading indicator of economic growth. But just as the latest stock market gains have mostly accrued to people at the top, the effects of a slowdown will be felt the most by the richest Americans.
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The economic reality is that an increasing percentage of overall wealth comes from dividends and capital gains, earned by individual owners of capital assets, who assets create wealth.
If we are to abate further concentrations of capital ownership our policies MUST be directed at reforming the system with tax policies incentives that induce corporations to pay-out fully their earnings to the stockholders, thus abating speculating in the casino stock market, and finance their growth with the issuance and sale of new stock to be purchased by the now property-less and under-capitalized masses using insured, interest-free capital credit loans repayable out of the earnings dividends generated by the investments in economic growth.
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 expanded capital ownership opportunities for all Americans.
When one fully realizes and understands the function of business––to conceive and make products and services that will be purchased by “customers with money” and generate profit earnings to the owners of the companies, after all operating costs have been paid for, including the costs of labor––it should become obvious that a prime mission of our nation should be to broaden capital ownership.
The role of physical productive capital, the non-human factor of production, is to do ever more of the work, which produces wealth and thus income to those who own productive capital assets. Full employment is not an objective of businesses. Companies strive to keep labor input and other costs at a minimum in order to maximize profits for the owners. They strive to minimize marginal cost, the cost of producing an additional unit of a good, product or service once a business has its fixed costs in place in order to stay competitive with other companies racing to stay competitive through technological innovation. Reducing marginal costs enables businesses to increase profits, offer goods, products and services at a lower price, or both. Increasingly, new technologies are enabling companies to achieve near-zero cost growth without having to hire people. Thus, private sector job creation in numbers that match the pool of people willing and able to work is constantly being eroded by physical productive capital’s ever increasing role.
While this is a simple concept to grasp, neither Democrats or Republicans see the solution: lift ownership-concentrating Federal Reserve System credit barriers and other institutional barriers that have historically separated owners from non-owners and link tax and monetary reforms to the goal of expanded capital ownership. This can be done under the existing legal powers of each of the 12 Federal Reserve regional banks, and will not add to the already unsustainable debt of the Federal Government or raise taxes on ordinary taxpayers. We need to free the system of dependency on Wall Street or the accumulated savings and money power of the rich and super-rich who control Wall Street. The Federal Reserve System has stifled the growth of America’s productive capacity through its monetary policy by monetizing public-sector growth and mounting Federal deficits and “Wall Street” bailouts; by favoring speculation over investment; by shortchanging the capital credit needs of entrepreneurs, inventors, farmers, and workers; by increasing the dependency of with usurious consumer credit; and by perpetuating unjust capital credit and ownership barriers between rich Americans and those without savings. The Federal Reserve Bank should be used to provide interest-free capital credit (including only transaction and risk premiums) and monetize each capital formation transaction, determined by the same expertise that determines it today––management and banks––that each transaction is viably feasible so that there is virtually no risk in the Federal Reserve. The first layer of risk would be taken by the commercial credit insurers, backed by a new government corporation, the Capital Diffusion Reinsurance Corporation, through which the loans could be guaranteed. This entity would fulfill the government’s responsibility for the health and prosperity of the American economy.
Support the Capital Homestead Act at http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/ and http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/.
