Stocks were sent on a bit of a roller-coaster ride Friday. The Dow Jones industrial average was down nearly 172 points early in the session, but some investors took advantage of the steep drop to cherry-pick stocks. The blue-chip index closed down 40.86 points, or 0.3%, at 14,565.25. Above, a trader works on the floor of the New York stock Exchange. (Spencer Platt, Getty Images / April 5, 2013)
On April 6, 2013, Andrew Tangel writes in the Los Angeles Times:
The government’s disappointing jobs report disheartened investors about the pace of the global economic recovery, and short-circuited a rally that pushed stocks up more than 10% during the first three months of the year.
Investors fled stocks Friday after the Labor Department reported that the U.S. added a mere 88,000 jobs in March. That number was well below the 190,000 jobs that analysts were expecting, and renewed fears that the labor market might be stalling.
Wall Street had been growing more upbeat in recent weeks that the economy was steadily improving and sent major stock market indexes to record highs. However, investors were left unsettled this week after the jobs report capped a week of lackluster reports on manufacturing and the labor market.
Unfortunately, the stock exchanges want people to see what they offer as “investments” when in reality they are bets that a company’s stock value will rise or fall. While somewhat connected to the real world of producing products and services, the exchanges are essentially gambling outlets.
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. The exchanges operate as a zero-sum game; for every gainer, there’s a loser. Wall Street doesn’t fly any airplanes or raise any corn or do anything else in the way of producing products and services. It just plays games with your money from your “savings.” And when you take it out in pensions, you’re going to get less than the company put in for you.
While capital credit is extended to the wealthy to purchase assets that are expected to pay for themselves out of the revenue generated from the capital investment, the system is not structured to provide equal opportunity to ordinary Americans. Yet capital formation investments are made by companies annually based on projections a number of years out (at least 5 to 10 years) with the expectation that the investment will pay for itself as a result of sustainable growth and consumer demand. Thus, the concept embraces the idea that capital formation is self-financing.
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.
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.”
Unfortunately, pursuing economic democracy has been frustrated by the systemic concentration of economic power and exclusionary access to future capital credit to the advantage of the wealthiest Americans. The so-called 1 percent rulers of corporations have rigged the financial system to enable this already rich ownership class to systematically further enrich themselves as capital formation occurs and technological industrialization spreads throughout the world, leaving behind the 99 percent to depend on income redistribution through make work “full employment” policies, government boondoggles, excessive military build-up and dependence on arms production and sales, and social welfare programs due to the lack of an alternative to full employment and the growing economic helplessness and dependency. The unsatisfied needs and wants of society are not in that 1 percent or for that matter the 5 percent; those people are not the ones who are hurting.
Once the national economic policy bases policy decisions on two-factor binary economics, productive capital acquisition would take place through commercially insured capital credit, resulting in a quiet revolution in which economic plutocracy will transform to economic democracy.
Support the Capital Homestead Act at http://www.cesj.org/homestead/index.htm and http://www.cesj.org/homestead/summary-cha.htm
http://www.latimes.com/business/la-fi-0406-us-stocks-20130406,0,1796903.story
