Also, you seem to be treating markets and exchanges as synonymous. SME's (and shares in them) get bought and sold every day - just not via exchanges.

Jesus died for somebody's sins but not mine - Patti Smith

Boards operations also to be transparent except when discussing trade secrets. It could do all its work over the internet, and 'everyone' could watch.

fairleft

Institutional investers holding stocks and voting against malignant corporate policies are one of the few points of leverage civil society has on private corporate governments, and shutting down secondary markets implies that most institutional investers can no longer hold stocks.

Utsukushikereba sore de ii

Huh? Is this learning the lessons of history or dislearning them?

Utsukushikereba sore de ii

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.

If you never fail, you're not trying hard enough.

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.

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.

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.

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

Willingness to invest in these ventures for a one in ten chance that one of them will yield 10x+ returns is only part of what creates the venture-capital: those willing to make that kind of investment and who succeed are, without an IPO, getting their reward in profit dividends over time rather than as one lump sum when the venture goes public, which means that the prospect of re-investing in a given year is the profit dividend yield rather than the funds from the IPO.

The idea that the stock market is primarily about raising funds for real capital investment is a fantasy of neo-classical textbooks, because neo-classical economics is incapable of modeling economic power, and so are incapable of explaining markets where what is being bought and sold is economic power. They therefore have to pretend that stock markets are something other than what they are.


Utsukushikereba sore de ii

Only if you assume that initial capitalisation comes from either small investors or organisations who make it their business to capitalise new enterprises with the intention of selling their commitment on the secondary market.

No, I only need to assume that at least some capitalisation comes from people who intend to resell at least some of their commitment relatively quickly in a secondary market.  If their money is left on the table, and it is a significant amount of money, it's inefficient. My claim would be that alot of venture capital, particularly in risky investments such as technology start-ups and artistic ventures, require the ability to realize a profit wihin a very short time horizon. Risk becomes reduced as a firm or industry matures, and the risk-seeking investors who require higher returns to justify the risk they take need to be able to exit and get replaced by risk-averse investors with lower return expectations.  Without a secondary market of risk averse investors -- the regulated stock markets, there would be significantly less venture capital available for innovative work.

Compare it to another issue for illustration: Do you believe it would be better policy for the government to ban marijuana commerce entirely, as is usually the case today, or to regulate it? Why or why not, and whom would benefit or be harmed either way?

Crunchyroll, for example, would not exist without venture capital: when it became untenable to proceed on its original basis, which relied on bootleg uploads, it would have simply shut down.

Utsukushikereba sore de ii

guess that means my diary is superfluous...

You've said you don't want to eliminate capitalism, which I take to mean corporate capitalism ("retaining" capitalism in the sense of eliminating corporate capitalism and instituting individual capitalism in its place would be about as wrenching a change as to syndicalism or communalism or resource feudalism), so what you are talking about is the same things going no, but with less accountability and more going on behind closed doors.

Indeed the bulk of the direct problems traced back to stock exchanges would be corrected by banning payment of executives in stock options maturing in under five years time and banning the incorporation of investment banking ... the problems from games played by derivatives traders are the problems of regulating any other casino, and are not due to the particular real or financial asset that the derivative is based on.

Utsukushikereba sore de ii

We don't need corporate capitalism the same way we don't need fertiliser or internal combustion engines.

Capitalism, like the internal combustion engine and the more aggressive kinds of fertiliser, are like burning down your house for warmth because you're too stupid to work out how to turn on the free heating.

Regulation certianly helps, but it has to be absolute to prevent regulatory capture. Once regulatory capture begins the inevitable outcome is the one we have today - bonkers people running around doing suicidally bonkers things for the bling.

It might be more useful to question aims and then consider means.

What would the aims of a sane culture be?

Would it surprise anyone - outside of the US and the MBA schools - if bling wasn't top of most people's lists?

We don't need corporate capitalism the same way we don't need fertiliser or internal combustion engines.

The thing is that - as the Economist pointed out the other day - the conventional corporate form is obsolescent.

New enterprise models are emerging because 'they work'.

My prediction is that capitalism as we know it will eat itself as the 'Co-operative Advantage' - ie the freedom from making returns to unproductive shareholders - makes itself felt.

In a world of direct instantaneous connections there is no need either for the State or for rentier shareholders as intermediaries.

Modern conservatives engage in one of man's oldest exercises in moral philosophy: the search for a superior moral justification for selfishness.Galbraith

... and indeed, a great system for financing the aggressive and persistent undermining of the regulations which would define a "well-regulated" corporate capitalism, which would seem to make well-regulated corporate capitalism an intrinsically unsustainable system lying on the path from mostly unregulated corporate capitalism to mostly unregulated corporate capitalism.

Indeed, we do not in fact know that partially regulated corporate capitalism is able to deliver increasing affluence and wealth without tapping non-renewable resources, nor indeed whether the increasing affluence and wealth was caused by the corporate capitalism, or whether corporate capitalism just happened to be at the right place and the right time to benefit from the technology for irreversibly tapping a massive stockpile of non-renewable resources.


Utsukushikereba sore de ii

This is the same ancient revolutionary vs. reformist debate on the left which we've had for at least a century.

Given the way things are going, the mess they have made of the economy, the inability of the great mass of the people to gain any reformist traction, given the security state organization and apparatus that has been legislated and put into operation in the USA and given the deliberate stoking of populist rage against scapegoats by ultra-conservative, authoritarian elements such as Murdoch and the Koch brothers, it is not inconceivable that a post-coup US Government could constitute the political and ethical equivalent of a new Soviet Union to the rest of the world. To me, that is the single greatest danger against which we need to guard, but I see little evidence of any effective action in that regard.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."

This is the same ancient revolutionary vs. reformist debate on the left which we've had for at least a century. As both models were tried in lots of different countries at different times, it's easy to compare and see which yielded the best results, and one have to be utterly blind not to see that it was the reformist path.

This is not as clear-cut as you put it, for a number of reasons:

1. Revolutions have a greater chance of success in countries where the reformist path is successfully obstructed. Reformism is, in turn, more likely to be obstructed in poor countries than in rich ones, since successful reformism requires sufficient resources to cover the needs of the poor and still leave comfortable opulence for the rich.

2. Reformism is much more likely to be successfully opposed where the oligarchy is more entrenched.

3. Left-wing revolutions are historically associated with agrarian societies. This is partially a function of the first two bullets, but part of the reason is almost certainly that agrarian countries offer greater scope for guerrilla strategy than urbanised countries do: It's easier to lock down urbanised than rural areas. It is also easier to avoid collateral damage in rural than in urban settings, something that is far more important to guerrilla strategy than to anti-guerrilla strategy.

- Jake

Our way of life is a lot more negotiable than the laws of nature.