14 July 2010

Another Capital Idea, Watson

There has been much ink spilled and breathless commentary spoken recently about how to expand the economy through the usual Right Wingnut means: giving away more money to Haves while strangling the Have Nots. Krugman deserves praise for devoting columns to outing such nonsense. I'm not going to repeat his words here (so far as I know), rather, I'm going to repeat my own.

One the more blatant demands from the Right is to reduce (eliminate, in a future wet dream) yet again the capital gains tax. Some of the so-called Democrats are, for reasons unknown, jumping on this honeywagon. The cheer from all aboard: "we don't want to penalize INVESTORS!!!!!!!!!" Such Bullshit.

As I have stated previously, when you buy $1,000 of Ford, not a dime of that money ends up in Ford's (the corporation) coffers to buy equipment or build a plant or buy supplies. Not one red cent. Nada. Nothing. You haven't INVESTED in Ford, you've GAMBLED that you bought those shares from some FOOL who doesn't know that Ford's share price is going to go up. None of your money is helping Ford. Now, Ford executives may benefit if enough of you GAMBLERS drive the share price nicely above their option strike price, such that they are blessed with an instant capital gain, FOR DOING ABSOLUTELY NOTHING USEFUL.

There was, until recently, Little Orphan Annie, both the comic strip and the weird eyed character. Her benefactor was Daddy Warbucks, stock speculator. Until, I'll guess, Ronnie it was generally acknowledged that money put into stocks was always, and only, SPECULATION. Folks who bought stocks were referred to as Stock Speculators. Then, with the destruction of defined benefit retirement plans and the contemporaneous replacement of them with 401(K)s, putting money in stocks was, by definition INVESTMENT. It would be impolitic to call a spade a spade then, since doing so would serve only to highlight the bait and switch trick that had been played. Those who retired in 2006 or 2007, believing that their INVESTMENT 401(K) would support them nicely discovered the truth: Joe Sixpack is not equipped to be an investment guru.

Stocks (bonds to a lesser extent) are GAMBLING, not investment. There is no economic benefit (to the national economy, and society) to tax GAMBLING at below the level of regular income. The only capital gains that should get such a benefit are those realized from buying stocks at Public Offering, and holding in toto until sale. Those funds did go to Ford; those funds were available to buy equipment, buildings, or supplies. That they likely went to pay the executives bonuses is bad, but not on the part of the buyer of the shares.

Capital gains is just a Ponzi scheme, nothing more. Never was anything more, never will be anything more. We, as a society, ought not to reward SPECULATORS. Just don't do that.

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