As to PR... when guys like Reagan or Clinton prove the political efficiency of controlling the media agenda, you can't blame them politicians anymore. People may be too gullible, or PR pros too good, in any case the fact is that PR is unavoidable, and that Democracy as a system is bound to lead to that by its very nature. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
Logical inconsistency of "everyone" owning results in the crisis like this. I am not for limiting rentship in a formal sense - but rentship should not be made as easy as possible. Communal usefulness of ownership "investments" is way overvalued. It we tend to value plain labour at slave wages, then the civilization did not move very far away from slavery yet.
It is indeed easy nowadays for governments to rationalize anything in any way they like. The PR evolution was very one-sided - and human gullibility was driven by the "feel-good" stories of personal versus social welfare. I even think that the mockery state of "regard" towards governments is a part of the viral PR campaign. When governments are controlled by circles that do not want governments function as good as declared, it should be no surprise if governments do their best to look bad. By now it is indeed dangerous to trust governments - except if you consider yourself profiting from the "government-is-a-problem" attitude.
I might want to share, and I might be indifferent, if not contemptuous to material possessions, but most of us aren't, I guess, despite casual spikes of generosity or highmindedness. I might see some sense in history, and direction for progress, but making the point to others is a whole different story. PRists will tell you that eventually they really only give people what they want - I hear that line all day long about reality shows, and I don't agree with it, but you can't argue highminded goals against audience - and profit. As to circles... maybe that was originally a problem of elites. I was looking at a superb chateau in the Berry, in the center of France, two weeks ago, and thinking that it might have been a bit unproductive to drive those people down from their high chairs and into the mob. They and others alike now use democracy and other advances of modern society for their own benefit, in ways the "mob" cannot control anymore. Before, it was easy (well, "easy") to revolt, strangle Paris with barricades, chase them out of the palaces, guillotine some of them. Now they ("they") learnt how to hide their power, protect themselves behind law and democracy. Even revolution will not change this - as long as there are mobs, there will be elites outsmarting them. I'm not being pessimist, just saying that the organization of the society needs the kind of overhaul going far beyond what some imagine. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
- Jake If you only spend 20 minutes of the rest of your life on economics, go spend them here.
Another problem is that the political economy of a society in which many people own very valuable but highly leveraged assets is much more conducive to highway robbery than an economy in which most people have no leverage and very low-value assets. Because it's hard to craft a tax code that will take back stolen assets when there are so many innocent assets to hide them among. And when Joe Schmoe is even more highly leveraged than an investment bank, then Joe Schmoe is going to go bust before the investment bank, if you just apply a blanket asset tax to recoup the stolen wealth.
As a rentier I provide capital to the company, in principle, that they need in order to develop
No you don't. Most often, shares are bought in the secondary market. What you provide in the secondary market is liquidity for the investors, not capital for the company.
Now, to a certain extent, liquidity for investors is helpful for the company, because it makes it easier for the company to raise capital. But only up to a point, because such liquidity also gives rise to short-termism and the kind of gambling with other people's money that we've seen lately.
I want my own pension fund to grow, my own shares to raise.
There is nothing wrong with bankrupt private pension funds that cannot be solved by raising public pensions.
But that concerns less those Joes and their little pension fund, and more the (unmastered) complexity modern maths and computers brought into finance.
No, that concerns precisely the little Joes and their little nest egg - because those little Joes and their little chickenshit savings are bound up to the same mechanisms that the big fatcats are bound to. So when the big fatcats gamble and lose, Joe loses his shirt. Joe then demands to be bailed out - and not entirely without justification. But bailing out Joe means bailing out the fatcats who should be taking haircuts.
The advantage of getting Joe Blow out of investments that he doesn't understand and doesn't need is that you can let the entire casino crash and burn at regular intervals, and it's only the gamblers who'll take haircuts. It's the same reason that you want to build an air-tight cordon between investment banking and payment clearance - so that you can let the whole investment banking sector burn to the ground if you need to, without Joe Blow noticing it at the ATM.
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.
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).
Everybody is a bit of a capitalist I suppose, owing a few shares, a life insurance, a piece of land, a wall in an appartment block. As a rentier I provide capital to the company, in principle, that they need in order to develop - and I hope with my help they'll make profit - big enough so that I get paid a small fee - and that my shares raise.
More than aligning interests, that they can join in the other class.
That some can join the other class. Not a very large percentage, though.
And if you think they're selected by merits rather than ass-kissing, then I have a CDO I wanna sell...
That democracy means not only one vote for each, but equal opportunities too.
Yeah. Which is why billionaires are anti-democratic almost by their very nature: They have opportunities that others do not.
I suppose further up the thread there is a definition of rentier - someone who lives exclusively on his rented house or share dividends ?
Something along those lines.
But do note that this is a case of one rentier feeding off three renters (or one and a half if you average it over their whole lifetime). So clearly this isn't something everyone can do. It depends on some people never being permitted to do it.
Now, if the lifetime average had been less than or equal to one half of a renter pr. rentier, then it would be possible for everyone to retire as a rentier (although there remains a question of distribution between different age groups). But that's not the case in this example.
If anyone can do so or not, it depends on luck, I guess, personal talents also, besides inheriting or other parasitic way (even though I don't find passing along my wealth necessarily immoral) and so on... we also need to define the word permitting, and assess the way the blocking happens, in order to think of a solution. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
Huge areas of central London are owned by a relatively small number of aristo Landlords.
And even in a small example, there's always a cost of entry. Right now it would be very difficult for anyone without a good block of starting capital to set themselves up with a buy to let scheme.
But generally rentiers are people who are inherently parasitic - they do no productive work themselves (which even a landlord has to do at least some of to keep a house maintained.) Instead they work at arms length, moving money around in the hope that it will catch a market trend, or - more straightforwardly - betting against other rentiers.
As long as money markets are fed with Ponzi-like cash flows and rent is paid as tribute, they can live like that quite comfortably.
But this process isn't just detached from the real economy, it actually starves it, because both wages and committed investment capital become more scarce.
But you won't ask people to justify their wealth, or what they do with it - and they may work through intermediaries anyway. That's why I was saying that today the democratic regimes and the rule of law provide perfect cover for "elites" (in the broadest sense, I find it nicer a word than fatcats :) ) and there's not much to do about it. How do you punish greed, other than through its most obvious consequences (like force them to repair electrical wiring in the rented house) Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
The problem is, how do you draw the line, how make the difference.
When they can buy seats in Parliament, they are a problem. That seems to happen somewhere between 100 million € and 1 billion €. So let's play it safe and say confiscatory taxation on any fortune above 50 million €. Surely fifty million should be enough for anybody? That's something like fifteen apartments - thirty if you're a couple.
I don't actually have a problem with rentiers per se - sure, they're inefficient and a burden on the rest of us, but they're not that much of an imposition, as long as they stick to their fancy boats and expensive golfing shoes. Or nice vacations in Bretagne. No (or very little, at least) skin off my nose.
But I have a problem with people who can buy and sell political parties wholesale.
And I have a problem with inherited wealth, for much the same reason that I'm opposed to hereditary nobility. Oh, sure, by all means pass along the chandelier and the silver candlesticks Greataunt Martie hid from the Germans during the War. And keep the yacht, if you want to. But hand over the factory and the copper mine and the TV station. Those are not your personal fiefdoms, to rule as you please and pass on to your heirs.
Rentiers a burden?... Those two guys earned their own money, paid building companies to build apartments (so they indirectly gave work to -- algerian illegals, well there might be something there), rented to people at fair price, maintained the property. I think your problem is with greedy, dishonest rentiers. I have that problem with all greedy dishonest, btw :)
The issue is not if they can buy seats or not, for we need to know who does, when and what it costs. It's illegal to buy seats. Inherited health may still have sane basis, right. My Breton landlords had a daughter too if I remember well, imagine her luck. I would tax inheritance - up to a point though, for I don't see any moral problem, except a risk of corrupting the offspring. If we raise the scale and speak about factories -- give them back to the -- State, then?... To political fiefdoms ? Hmm.
I would rather have a problem with hereditary fiefs, rather than the nobility per se. And you should count the number of former nobility working in finance and who are now buying back their old castles and some new ones. Free at last! Free at last! Thank God Almighty, we are free at last! (Martin Luther King)
Rentiers a burden?... Those two guys earned their own money, paid building companies to build apartments (so they indirectly gave work to -- algerian illegals, well there might be something there), rented to people at fair price, maintained the property.
I should re-phrase. Rentiering is a burden. The actual people involved may or may not be, overall, depending on whether they have previously contributed something of value to justify their current status.
I don't begrudge people who worked honest jobs for decades that they retire as rentiers. Although I would prefer if they could retire on adequate public pensions instead. But you work with the political economy you have, not with the one you'd like.
What I do begrudge somewhat is the people who buy at the bottom of the market and then, purely because rental values soar for a decade, can rent out and use the rent to pay interest on the mortgage and amortise the mortgage. Although that's still mostly small fry, and irritates me more because of what it says about the lack of counter-cyclical real estate policy than for the actual rentiering involved.
If we raise the scale and speak about factories -- give them back to the -- State, then?
The state can always auction them off, if you think that it's undesirable to have the government run factories.
Cultures which share too much stagnate through lack of incentive and reward.
Cultures which share too little stagnate through lack of majority opportunity and systemic top-down corruption.
The reality probably isn't as one-dimensional as that, but a Goldilocks economy which is designed with the explicit aim of balancing opportunity against opportunism could be an interesting thing.
