Using my examples above you mean that early stage investors who gave e.g. seed-money to a silicon valley start-up. That investor has two choices:
The question which really begs to be asked in the context of your question is really who finances companies early on and during the expansion phase? Are there not enough investors out there who could do without a stock market to be able not have to use venture capital funds which just want to get rich quick by an IPO? Getting relevant historic data would be very interesting but probably nearly impossible...
Huh? Is this learning the lessons of history or dislearning them? I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
I particularly like cranky's idea of a time-lapse workers buy-out, but everything else is laced with what you called up thread, "unintended consequences." As Colman said, a regulated market is required for allowing well-intentioned people to trade their interests.
The hard part to fathom is where to place the mirror so that people recognize that the problem isn't the stock (and commodities) markets, but that the society is rigged so that some people can't survive without a huge return. They've worked all their life, they want to live in the same fashion they have up until retirement, they don't want to sell their assets, so they have to play with their cash.
For the few who have saved a million and only need 40k a year (after taxes), 5% return on their money might do. I know one person who had a million after he retired. Actually, he has more than 2 when he retired, but bad investments left him a million after only 2 years.
Instead of being a way to keep things in balance, there are winners and losers, which appears to be at anything over or under 7%. Of course, being a loser once means that 7% just won't do...to the point where everyone's grandmother now has to be involved and gambling on every 20% potential that can spam our mailboxes.
The problem is not the stock market. The problem is how people are treated. Like many things, the solution turned into a problem. Never underestimate their intelligence, always underestimate their knowledge.
Frank Delaney ~ Ireland
Furthermore, it would be all but impossible for the small investor to create a diversified portfolio without stock markets.
My conclusion is that stock markets do lots of good, and nothing bad. If there is too much focus on quarterly earnings at the expense of the long term (and there is), then that's due to the growth of faceless capital (pension funds, hedgies, mutual funds etc), not due to stock markets per se. Companies with strong owners don't suffer from that problem, and the solution is to adapt our regulations so that being a long term strong owner pays a premium. Peak oil is not an energy crisis. It is a liquid fuel crisis.
All quibbling and P/N aside, Stock markets are an avenue for social and economic Good and a social and economic Bad. Under current regulation, and etc., they are more of a latter than the former. That is not intrinsic to a stock market but something we - in general - have chosen. We can choose otherwise.
Remove stock markets and the liquidity falls radically, and with it the supply of capital for companies to invest.
Just like now, you mean?
Stock markets are literally a late medieval throw-back - idiotic casinos for people with too much cash who don't understand how the physical world works and are only interested in mindless rat-headed comparisons of their personal rate of return while they chat with their fellow money morons at the country club.
Which sounds lime hyperbole, but if you look at the actual distribution profile of stock ownership in the West, you'll see it's not even an exaggeration.
Markets annihilate useful liquidity by skimming it off, hoarding it and wasting it, and also by raising the cost of entry for small innovators - because the last thing anyone with a good idea wants is to have to share board level control of it with some privileged frat jock who believes he's cooler and smarter than people who do real work.
The only sane way to use markets is to force investors to actually invest in real projects, to make investment more accessible, to create ratings agencies that aren't just political PR firms, and to aggressively redistribute profits into education, science R&D, and social investment.
And what's worse is that markets aren't just economic idiocy, they're also directly responsible for distoring politics in ways that are fatally corrosive to real participation and democracy.
Well, we can but we'd better be prepared to increase the number of prisons (privatized, of course! :-D ) by 1,000%.
The problem isn't the stock market per se. The problem is we've chosen to put the sociopaths in charge of the looney bins and have the monkeys supervising the banana plantations.
And when new equity is part of raising capital, its normally as a complement to bond issues, to avoid over-leveraging.
As far as taking the place of common stocks for capital raisings, ChrisCook's units would seem to be a useful recourse: issue tradeable units on a particular revenue stream, and then the leverage is intrinsically lower than bond obligations, and the need to balance it with new equity to reduce the leverage substantially reduced.
But of course this is all in the context of "what the new revolutionary government does after taking power", because to abolish publicly traded corporations is to essential abolish the entire political economy of corporate capitalism, and the Powers That Be who are having a death sentence passed on their power will fight it with far greater unity and far greater ferocity than any of the reformist battles any of us have seen fought in the last few decades ... whether won or lost. I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
Quite so.
In Canada and Australia before that we saw units in 'Income Trusts' which emerged spontaneously, and were hugely popular with pension funds etc. These days we see the Master Limited Partnership which unitises revenues in a similar fashion.
This uses the Limited Partnership form, which, unlike the UK LLP or US LLC, has partners with limited liability (and little or no management control) and 'General Partners' with unlimited liability who manage the investment.
It's only a matter of time before people start using US LLCs and UK LLPs in exactly the way I advocate - indeed, they may have already done so - the Hilton Group created in the UK what I call a 'Capital Partnership' (>£1bn) but didn't 'unitise' the partnership interests, as far as I know.
We're getting loads of interest in Scotland up to and including ministers. Watch this space. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
