Do you call that "deflation"?

I wouldn't have voted for Hillary. If it was between those two, I would have voted for McCain. She gives me the creeps.

Everybody promises too much. McCain promised to buy every delinquent mortgage out there at face value, too. Both of them made promises before the financial meltdown and then, apparently, felt they had to stick to them.

That's politics. I think that most of us discount those campaign program ideas. I take them more as an indication of what their motivations and philosophy are all about.

Eh, it will be fun. You'll see lots of happy, happy people, excited as can be. Doesn't it make you happy to see so many happy people? Both coasts will be happy. Canada will be happy. Kenya will be happy. Even France will be happy.

Happy, happy, happy. They'll be dancing in the streets, all over the world. They'll be dancin' in Chi-caaaaa-go. Down in New Orleans. Way up in New York City. Oh, it doesn't matter what you wear, just as long as you are there... d8-)

-- Ed Huntress

------------------ Don't confuse capital growth with "growth," don't confuse raw capital growth with inflation adjusted/tax effect growth, and above all don't confuse an increase in "spondulicks" with an increase in capital. {see my earlier post on this}

Even in a relatively static economy [from a population and standard of living/conspicious consumption standpoint] there should still be plenty of opportunity for profitable investment, for example upgrading/replacement of existing plants/equipment, production of consumables such as food and clothing, and [legitimate] replacement products.

What would be missing is the "leverage" [steroids/meth] and outsized returns, which never seems to "trickle down" to the savers that provided the capital in the first place.

For the "investors" :-( that are looking for "action" there are plenty of casinos, both in the US and abroad, that are more than willing to accommodate them. This also has the benefit that "the players" are further removed from the real economy, and less likely to cause damage.

That's a static economy, like a machine into which you put fixed amounts of inputs and get fixed amounts of outputs. If you know of a capitalist system that has worked with static growth, I'd love to hear about it.

You're talking about the kind of out-of-control finance that we've been going through lately. That's not the basic growth model of capitalism.

The kind of imaginary growth we've had lately is not the operating principle of capitalism. All experience-based models show that capitalism works when you have opportunities for growth. Without it, you kill the incentive for capital to take risks.

With no growth, productivity increases and other innovations are zero-sum; growth in one area means loss in another. THAT's the gambling game, in which there is no net growth, and any advantage one party gains comes at the expense of another.

If you say that it isn't necessary for that to happen, then you're talking about a growth model again. Slow growth, fast growth -- any growth will motivate the system. But in a global economy, no one country or group of countries (like the West, for example) can simply choose slow growth. If you try, you get killed by the other countries that successfully operate on a fast-growth model.

This can get complicated. If you know of a way to run capitalism with no growth, you should patent it. You'll grow like crazy. d8-)

-- Ed Huntress

Someone would risk cash for income i.e. dividends. The only justifiable and sustainable rise in the price of the equities is the rate of inflation, since those equities represent the value of the company.

I think that John has hit the nail on the head. income from capital gains should be taxed at similar rates to income from labour.

Mind you, I think that anyone that makes a living from gambling should be treated with significantly less respect than an honest pimp or drug pusher :-(

Mark Rand (happy Obama day :) RTFM

But they don't. Dividends-only securities only work when there's a guarentee for the principle. In other words, bonds, and some types of preferred stocks. The high-risk equities market would dry up with no growth. Where would the capital come from for new startups?

Geez. What kind of capitalism do you have over there? The only justifiable and sustainable source of increase in the price of equities is economic growth.

That's another old argument. Are you basing yours on "fairness," or on proven trends in capital investment?

I always wanted to be a card-counter at blackjack, but now they use too many decks. Don't try me in a friendly game with only one deck, however. d8-)

Thanks. It's quite a party.

-- Ed Huntress

Well Ed I'll tell you. The tax plan Obama is going to ask Congress to pass changes the capital gains rate on any money put into a start up at ZERO. Since passive income is taxed at capital gain rates, it will essentially be tax free.

I'll bey you didn't know that

JC

I heard it. I've been watching a LOT of TV -- including Fox, MSNBC, the BBC, and CNBC. That's more TV than I've watched in the past year. And I've been reading _The Economist_ from cover to cover, and even Rupert Murdoch's new toy newspaper, the _Wall Street Journal_.

In other words, my life is a complete wreck, and I need two weeks in a health spa. d8-)

-- Ed Huntress

You'll just have to make do with a weekend in the workshop like the rest of us :-)

Mark Rand RTFM

============= Which is reasonable if the intention is to increase the opportunity for employment, innovation, etc.

This occurs only on the start-ups, and to a much lesser extent with IPOs [much of the IPO money goes for underwriting charges, and sales of existing stock which does not fund any company activity].

Secondary sales, i.e. by one "investor" to another, contributes no money to the corporation but is a simple reshuffle in ownership of existing assets.

Unfortunately, the huge majority of exchange stock sales (>99%) are secondary, although the excuse/rationale for the great unwashed for this activity and special tax treatment is that this somehow [magically?] provides funds for corporate investment/development. This is one of the worst cases of "bait and switch" I have ever seen.

I have no problem with low or even zero income taxes on profits derived from direct investment into corporations/companies, either from "capital gains" [one time sale of IPO stock] or even dividends, but I have a great deal of reservation about any special tax treatments for "profits" from the secondary market speculation/manipulation, and indeed a *HIGHER* than regular tax on these profits, particularly when held only a short time [i.e. day trading] appears to be fully justified as this activity is not only non- but counter- productive, and ties up considerable capital and highly talented people in totally unproductive activities. Why subsidize, at best useless, and most likely harmful, activities?

Unka' George [George McDuffee]

------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).

There isn't any other reason to consider such.

IPO's aren't start ups. IPO's are how start ups eventually cash out.

And isn't a start up.

And isn't a start up.

You are talking about what is well beyond a start up.

JC

I've already taken a nap and I feel much better.

-- Ed Huntress

Their bubble was far worse than ours.

This applies also to the trade and budget deficits.

job as long as

once was. We

getting just as

I think that after a while, we will grow alright due to simple laws of economics. If this "Great Recession" shakes off the cruft, so much for the better.

The thing about capital gains tax is that the longer you hold the instrument, the lower it is.

The culprit in our latest "Great Recession" is not speculation, but speculation on borrowed money (such as in real estate). A brake needs to be put on all forms of it.

------------ In the world of Washington, this would provide additional money at the top to trickle down as one reason, another reason would be to provide a tax reduction for major campaign contribution groups.

It all depends who your "constituents" are, and your view of society/economy.

Now if you are talking about the general public....

Unka' George [George McDuffee]

------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).

------------- Indeed. information continues to bubble to the surface that many of the organizations in trouble now have *NONE* of their own capital involved, only borrowed funds, {having pulled all their own money out} leading to the observation that it is possible to have an infinite amount of leverage.

Lehman Brothers is another example, where the "official" leverage was c. 30X, however when the other forms of debt obligations are included such as the "guaranteed/insured" principal securities which were operationally no-colateral loans, and that capital was used in Lehman speculative activities, the actual operational leverage was >100X.

The financial services division of AIG is another activity with very high leverage ratios, which seem to get higher with every audit report (and request for additional taxpayer funds).

In many cases, limitations and controls such as loan reserve requirements *WERE* in place, but were evaded by the creation of SIVs, SPEs, and conduits.

Until and unless there are significant numbers of criminal trials, resulting in long prison sentences and asset forfeiture, for both the executive and directors of the companies involved

Unka' George [George McDuffee]

------------------------------------------- He that will not apply new remedies, must expect new evils: for Time is the greatest innovator: and if Time, of course, alter things to the worse, and wisdom and counsel shall not alter them to the better, what shall be the end?

Francis Bacon (1561-1626), English philosopher, essayist, statesman. Essays, "Of Innovations" (1597-1625).