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Colman is right on the money. Remove stock markets and the liquidity falls radically, and with it the supply of capital for companies to invest. The result is less investment and fewer jobs, and more debt for companies as they try to compensate for their deficit of equity.

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.

by Starvid on Fri Aug 27th, 2010 at 10:41:47 AM EST
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I wouldn't go as far as to state "stock markets do ... nothing bad."  Depends on one's definition of "do," I suppose.  :-D

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.

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Aug 27th, 2010 at 11:00:04 AM EST
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Starvid:
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.

by ThatBritGuy (thatbritguy (at) googlemail.com) on Fri Aug 27th, 2010 at 11:00:15 AM EST
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Can't outlaw stupidity, greed, and ignorance.  

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.  

She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre

by ATinNM on Fri Aug 27th, 2010 at 11:36:57 AM EST
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