Which means I'm not really a rentier then - I'm just gambling with my own money. You can be certain the goal of any rentier is not to "provide liquidity" to whomever the 3rd party may be, but to be an investor, in the hope that he'll be able to join in the profit - if and when profit will be. On the other hand, your response is a mere technicality, I was putting a problem of principle about the role of a (genuine) rentier. I was arguing that his role is basically 'good', that he's not living on the back of the company like some sort of parasite, and in general that the economy is far more complex than that: we all rent stuff, loan stuff, borrow money and save, in different measures, and by that, to invalidate the idea that "we cannot all be rentiers". as a simplification - unless by rentier we only understand those who live exlusively on rent - in which case, I apologize for having misunderstood the matter.
A solution should be found to bail out Joe and not the fatcats. We should also give a more precise definition to fatcats: are they the traders, the fund managers, banks' managers, or shareholders, all of the above - or the Filthy Rich in general ? And who is Joe? The one way to protect them Joes, is to provide the markets with proper regulation and render them transparent. This way a few rapacious fatcats won't manage to bring the whole economy down - not that easily, any way. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
Which means I'm not really a rentier then - I'm just gambling with my own money.
You do not need to be an investor in order to be a rentier. And, depending a little on your definition of "rentier," you do not need to be a rentier in order to be an investor either.
You can be certain the goal of any rentier is not to "provide liquidity" to whomever the 3rd party may be, but to be an investor, in the hope that he'll be able to join in the profit - if and when profit will be.
The point of being a rentier is to control assets that permit you to claim dividends and/or capital gains. Whether you create those assets through judicious investment, buy them on a secondary market or inherit them from your clan patriarch parents is irrelevant.
On the other hand, your response is a mere technicality, I was putting a problem of principle about the role of a (genuine) rentier. I was arguing that his role is basically 'good', that he's not living on the back of the company like some sort of parasite,
Yes, and your claim was based on a wrong understanding of how the stock market works, which caused you to exaggerate the benefit of stockholders to society. Providing liquidity creates value, up to a point, because it makes other people more likely to invest. And it can provide efficiency, although this is even more tenuous, by permitting those who are good at starting companies to divest from mature companies, and use their talents productively in starting new companies.
What it does not do, however, is create new investment. Secondary markets - by definition - cannot do that. And this difference is important - it is like the difference between originating mortgages and building houses. Originating mortgages might allow more houses to be built (or it might just inflate the prices of houses by allowing people to do leveraged takeovers of already existing houses). But it does not build the houses.
A solution should be found to bail out Joe and not the fatcats. We should also give a more precise definition to fatcats: are they the traders, the fund managers, banks' managers, or shareholders, all of the above - or the Filthy Rich in general ?
The traders are in some cases and not in others. Hedge funds are basically an abomination that shouldn't exist in any properly run economy, so anybody who makes a living off them needs to take a haircut. Bank managers who drove their banks over a cliff are certainly fatcats. Shareholders may or may not be fatcats, but certainly knew - or should have known - the risks of gambling on the stock market. The filthy rich in general are usually fatcats, but even if you can find a couple of examples that are not, they can afford to take a haircut. So there's no need to protect them.
Functionally, I guess "all of the above," except some of the traders.
And who is Joe?
The dude who makes less than twice the median income and doesn't have any net wealth to speak of (i.e. less than around € 1 million).
The one way to protect them Joes, is to provide the markets with proper regulation and render them transparent. This way a few rapacious fatcats won't manage to bring the whole economy down - not that easily, any way.
Two other ways to protect Joe is by providing decent public pensions and putting the utility parts of banking in a straitjacket to prevent them from getting mixed up with the gamblers.
Don't get me wrong, regulation is fine and good - I support getting as many safety nets between Joe and the Ponzis as humanly possible. I just don't think that regulating the stock markets can or should replace fireproofing the payment clearance system or maintaining reasonable public transfers.
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
You forgot to add honest hard work - see my example.
"Yes, and your claim was based on a wrong understanding of how the stock market works
Then the problem is the organisation of the stock market.
" it is like the difference between originating mortgages and building houses"
I agree, and I could return your sentence and say that you cant even put one brick if you don't have the funds to buy it. Providing the means is just as important as managing the work or actually putting the bricks.
"they can afford to take a haircut. So there's no need to protect them"
I understand who needs to take a haircut, but you confirmed my thought - we can suspect who fatcats are, but not be certain, or generalize.
"The dude who makes less than twice the median income and doesn't have any net wealth to speak of"
The poorest, then? Why mind you the median incomes can't be Joes too - are they not most touched by this crisis, and are they not the most numerous, and those who pay most taxes? Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
I would note, however, that "honest hard work" does not, in the ordinary course of events, enable one to live off rents.
Partly. There is no doubt that the stock market could serve its legitimate purpose with much less fuss and bother than today. But no matter what, it's hard to imagine that the stock market will ever be dominated by IPOs. That's what private equity does, and I don't see what the stock market can do there that existing structures don't do just as well.
I agree, and I could return your sentence and say that you cant even put one brick if you don't have the funds to buy it.
You do not need mortgages to build houses. Much of the value of the mortgage is backed not by the house, but by the land it stands on, which could be communally owned. In that case, it is certainly possible to build houses with equity alone, and no mortgage. That houses are leveraged five-to-one is a relatively recent phenomenon, as the history of political economy goes...
Providing the means is just as important as managing the work or actually putting the bricks.
Depends on your definition of "the means" - if you mean the bricks and the mortar and the railroad to transport them from where they're produced to where they're needed... then yes. If you mean the "money," then no. Money is dependent on the real economy, not the other way around.
We can provide general rules about who need to take haircuts. That's not a perfect match for who are the fatcats, but it comes close enough for practical political purposes.
We can also provide pretty good rules of thumb to identify fatcats directly. Any billionaire is a fatcat, for example, by the very fact that he is a billionaire. But not every fatcat is a billionaire (some are "merely" multi-millionaires, while some have little in the way of tangible assets, but are on the inside of the network of Good Old Boys).
But of course there is a sliding scale, and some will fall in a grey area which requires case-by-case evaluation, and permits a modicrum of personal taste to enter into evaluations.
The poorest, then?
No, everybody who makes less than two times the median income. That - by definition - includes more than half of the population. It's been a long time since more than half of the population of any industrialised economy could justifiably be called "the poorest."
Why mind you the median incomes can't be Joes too - are they not most touched by this crisis, and are they not the most numerous, and those who pay most taxes?
Last time I checked, "median income" x 2 > "median income"
By means I also mean the funds needed. Money is not dependent as is a part of the real economy become fluid, you can't give more value to one or the other. Banks are necessary, but companies run by financial barons can be just as weird as those run by their own employees - without that meaning that either one cannot possibly succeed.
I doubt a billionnaire has all those money in bank accounts and on his very name. He'll tell you he only owns stock in successful companies. We can count the houses they own under their name though - and the size of those houses. Or the private jets and the Ferrraris. Mmm. Checking every citizen's fortune then, all the time, all through their life?... I dont say you're wrong, but thinking how to put it in practice - I don't see how any sensible person should own 20 million. Republicans would tell you those millions come back into the large pool of the economy anyway - and one way or another trickle down :) A NYT article was mentioning a certain belt-tightening starting to trickle up btw, very funny. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
5-1 leveraged houses or 40-1 leveraged banks are a category in itself, we should leave them out.
5-1 leveraged means a 20 % down payment. That's actually the norm for responsible real-estate finance in most parts of The West(TM).
Of course, that leverage ratio goes down over time (assuming that you're not on an interest-only loan...).
Money is not dependent as is a part of the real economy become fluid, you can't give more value to one or the other.
Economies existed long before anything we would recognise as "money." And money existed long before anything we'd recognise as "banks."
Money is a way to decide who can exercise command over other people's labour. There are other ways that societies can decide that. Now, you can make a case that those are not as efficient, or as politically desirable. But that does not change the fact that money is a command and control structure, not a resource.
I doubt a billionnaire has all those money in bank accounts and on his very name. He'll tell you he only owns stock in successful companies. We can count the houses they own under their name though - and the size of those houses. Or the private jets and the Ferrraris. Mmm. Checking every citizen's fortune then, all the time, all through their life?... I dont say you're wrong, but thinking how to put it in practice - I don't see how any sensible person should own 20 million.
Motor vehicles and maritime vehicles are already registered as part of the licensing process, so they can be taxed the same way as factories and real estate. But actually, I don't really care if you have four yachts in the harbour (as long as you pay your fuel taxes...). That's not a problem. Control of seats in parliaments and control of the means of production are a problem.
Of course you can stash a billion € in the Bank of Serta, and there'd be bugger all the tax authorities could do about it without breaking into your home. But that has a negative net return on investment (due to inflation), so that problem goes away on its own.
Keep an inventory of all real estate in the country (this has to be done anyway, in order to do city planning).
sensible planning? what's that? in the UK registration only has to take place at change of ownership, and consequently 40% is still unregistered, and that 40% is mainly owned by the Aristocracy, who are one of the main groups avoiding tax.
Land Registry : Press notice
Land Registry - the government department responsible for registering land ownership in England and Wales - is encouraging landowners to voluntarily register their land, securing their ownership with state-backed registration. In North Yorkshire 42 per cent of land remains unregistered. In England and Wales the amount of unregistered land is just under 40 per cent.
Various private and semi-private pension plans are more or less regulated. Huge mess, and a political liability to boot, because these pension funds are, of course, sacred cows who have to be bailed out when they go bust.
I did a diary on the Danish system a while back, and its contents is still valid today.
Might be interesting to see how much money will be required now, and work out how much cash has been lost thatr should have gone to the government in supporting this and has instead vanished down the plughole. Any idiot can face a crisis - it's day to day living that wears you out.
In other words, pension privatisation is a zero-sum game (or negative-sum, if you count the time and effort spent on management, and all the other productive assets that are betrayed into hopelessly unproductive works).
