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The beauty of a true free market (which we really have not seen in America) is that other people's greed keeps the status quo balanced. Excessive government regulation on businesses is creating a system which allows what you are describing.
I agree with you 100% on this one, and if the government would step back and allow businesses to operate in a true free market, the income and class disparities would largely disappear.
This is all true, but the government regulation of which you speak is bought and paid for by the corporations who use government as another tool to monopolize the marketplace. Before we can have a free market economy, we have to have a government that represents the interests of the people. To have such a government, we need an educated and ethical population that exercises their duty as citizens.
In the end, we reap what we sow.
Can you please speak to why you believe the theories of Brownian motion applied to statistical arbitrage do not create value in the market?
The value of stocks rises over time, the total money in a market rises over time.
Here is a simple example:
Lets say I start a bank. I have no one's money, and my bank is worth $0 to a man, lets call him Mr. Investor. You give me $10 and I keep it for you. At this point, the total money in the system is $10. Bob then comes up to me and wants to borrow money. I let him borrow $9 of your money. He then goes and gives that $9 to Jim to buy a hamburger. Jim turns around and gives me that $9 to keep in my bank. Now, Mr. Investor looks at my bank again and sees I am holding $19 in balance. Mr. Investor now values my bank at $20. That $20 is real value and actual money in the financial system. Through this series of transactions, with no one losing money, my bank has created $20 in intangible assets that can be used in the financial market. My bank has created wealth from nothing.
Someone does NOT have to lose. As I said before, the world of business and investing is not a zero sum equation.
I think it's quite possible that someone DOES have to lose.
Back in the 1980s there was an economic boom, and I saw rising affluence all around me. Wealth was being created, but I did not acquire any. (Put another way, I created wealth for my employer and for my landlord without creating any for myself.)
Since there was an increase around me of money and affluence, people had more money to spend on housing, and rents soared. Since my income did not keep up with the rising affluence and soaring rents, my standard of living actually declined.
This is all true, but the government regulation of which you speak is bought and paid for by the corporations who use government as another tool to monopolize the marketplace. Before we can have a free market economy, we have to have a government that represents the interests of the people. To have such a government, we need an educated and ethical population that exercises their duty as citizens.
In the end, we reap what we sow.
I do agree with this completely. Corporations will use whatever legal tactics they can to raise profits (just as governments use whatever tactics they can to gain profits through state capitalistic measures). The root of this problem is absolutely education. As libertarian and free-market minded as I am, I firmly believe in government mandated education. The first and foremost reform we must have to gain any real traction is in the realm of education. As long as the average American is as uneducated as they are today, we will continue to have problems. The fact that over 14 times more people watch American Idol than read the Wall Street Journal should be depressing to anyone.
The fact that over 14 times more people watch American Idol than read the Wall Street Journal should be depressing to anyone.
I don't find that depressing at all, that is apples and oranges.
American Idol doesn't interest me at all but interest in arts/performance is a personal taste I won't judge anyone for liking to watch it. It is also in a primetime TV segment where families can watch it together, a totally different media format than a daily print that isn't cheap and I'm not even sure is available to people in all markets as a daily.
Also, the average person's personal finance interests are probably better served by more easily digestible content at a different level. Suze Orman advising someone not to put half their money in their own company's stock is a better packet of information for the average American than reading a full page article in the WSJ about the shakeup in Caterpillar's overseas management.
I don't find that depressing at all, that is apples and oranges.
American Idol doesn't interest me at all but interest in arts/performance is a personal taste I won't judge anyone for liking to watch it. It is also in a primetime TV segment where families can watch it together, a totally different media format than a daily print that isn't cheap and I'm not even sure is available to people in all markets as a daily.
Also, the average person's personal finance interests are probably better served by more easily digestible content at a different level. Suze Orman advising someone not to put half their money in their own company's stock is a better packet of information for the average American than reading a full page article in the WSJ about the shakeup in Caterpillar's overseas management.
You are absolutely right on this. I was simply trying to draw a comparison and picked two media segments as examples. Without taking the specific media I chose literally, I think you understand my point.
If the average american enjoyed Suze Orman over the new episode of 'glee', I would love that as well.
We're on the same page. I believe personal finance should be more strongly represented as required curriculum in both high school and college. The basic principles of debt, budgeting, etc. would do far more for the average graduate than so much of the other crap they learn and never get to apply.
I do agree with this completely. Corporations will use whatever legal tactics they can to raise profits (just as governments use whatever tactics they can to gain profits through state capitalistic measures). The root of this problem is absolutely education. As libertarian and free-market minded as I am, I firmly believe in government mandated education. The first and foremost reform we must have to gain any real traction is in the realm of education. As long as the average American is as uneducated as they are today, we will continue to have problems. The fact that over 14 times more people watch American Idol than read the Wall Street Journal should be depressing to anyone.
While I am not so enthusiastic about public education, the main problem with public schools today is the lack of parent involvement.
Parents need to take responsibility for overseeing their local schools and monitoring everything from the curriculum to the cleanliness of the rest rooms. They need to be in the faces of the administrators, and involved in local school board elections. That is when you will begin to see the kind of change that will be necessary to turn this country around.
Of course this type of involvement requires parents putting more value on being parents, and less on careers, and the sole pursuit of making money.
We're on the same page. I believe personal finance should be more strongly represented as required curriculum in both high school and college. The basic principles of debt, budgeting, etc. would do far more for the average graduate than so much of the other crap they learn and never get to apply.
You want degree? Must pass PF101 and PF102.
As an involved parent/school volunteer and business owner, I agree with previous posts on how today's school curriculums are lacking in business/finance education.
But I think this kind of education should start even earlier - in elementary school. My kids naturally have strong entrepreneurial/leadership skills (just as my spouse and I always had), but IMO their schools/teachers devalue and even discriminate against these kinds of aptitudes in kids.
E.g. My kids have gotten into trouble for starting small businesses on the playground (no, not drugs - things like bartering with their lunch cookies!), for using the library web to research business/finance jobs (they were told they should research practical careers like "teacher or doctor"), for trying to recruit/manage a football team (they were told everyone must get equal time playing quarterback).
Schools/adults now try to manage every single aspect of childhood. Many schools have eliminated recess or the activities are highly regulated by adults. Kids are also overscheduled in adult-run afterschool activities. It is nearly impossible for a kid to find a pick-up game of basketball/baseball - they need to enroll in an adult-supervised program. Yet these are the kinds of situations where kids learn the communication and team leadership skills they need to really prosper.
I believe kids are being trained to be followers who are less likely to take individual risks. They are always waiting around for others to give them directions. I believe you can see the effect in today's college students/workers.
Along with lack of personal finance training, they are also often spoon-fed "new" math programs that de-emphasize the kinds of quick, efficient calculation skills that are used every day by successful investors/entrepreneurs. Instead, they are asked to keep "math journals" with stream-of-consciousness writings to describe the many methods for adding 2 + 2.
Poor training in personal finance/business math skills along with a devaluing of competitiveness, individuality, risk taking, and leadership skills - this is why I think public education is often bad for entrepreneurship. Little wonder that some of the world's most successful business leaders were drop-outs.
Can you please speak to why you believe the theories of Brownian motion applied to statistical arbitrage do not create value in the market?
The value of stocks rises over time, the total money in a market rises over time.
Here is a simple example:
Lets say I start a bank. I have no one's money, and my bank is worth $0 to a man, lets call him Mr. Investor. You give me $10 and I keep it for you. At this point, the total money in the system is $10. Bob then comes up to me and wants to borrow money. I let him borrow $9 of your money. He then goes and gives that $9 to Jim to buy a hamburger. Jim turns around and gives me that $9 to keep in my bank. Now, Mr. Investor looks at my bank again and sees I am holding $19 in balance. Mr. Investor now values my bank at $20. That $20 is real value and actual money in the financial system. Through this series of transactions, with no one losing money, my bank has created $20 in intangible assets that can be used in the financial market. My bank has created wealth from nothing.
Someone does NOT have to lose. As I said before, the world of business and investing is not a zero sum equation.
There are several flaws in your story. First of all, Jim doesn't have $9 to put in your bank, he has $9 to pay his bun supplier and his counter girl, and if he's lucky, $1 to put in your bank. Second, you have not created wealth, you have just put wealth in your drawer. That $10 still belongs to Mr. Investor, and when he and Jim come to get it back, the wealth that you "created from nothing" goes back to being nothing again. It's called a run on the bank, and it happens when Jim and Mr. Investor (and, sadly, you) discover that you did not create any wealth at all. You just bought a big cigar and said you did, and now you're jumping out of an upstairs window.
The fact that three people all claim to own the same dollar bill doesn't make it worth $3.
There is a difference between perceived worth and actual value. Let's say you have Honus Wagner baseball card, believed the only one in existence, and you list it as an asset worth $250,000. I then find one in my attic, and it is no loner unique, so the value falls to $25,000 each, or a total of $50,000. Has the "national wealth" been reduced by $200,000? No. Only the perception of the wealth has.
While I am not so enthusiastic about public education, the main problem with public schools today is the lack of parent involvement.
Parents need to take responsibility for overseeing their local schools and monitoring everything from the curriculum to the cleanliness of the rest rooms. They need to be in the faces of the administrators, and involved in local school board elections. That is when you will begin to see the kind of change that will be necessary to turn this country around.
Of course this type of involvement requires parents putting more value on being parents, and less on careers, and the sole pursuit of making money.
I agree with all of this except your last statement. I think putting value on careers is a good thing, and something that helps society a great deal. I think too many parents put too much value on free time, hanging out and having fun rather than taking the responsibility of their jobs as parents. America values leisure so highly that it is willing to throw valuable things such as education or careers that help society as a whole aside for the sake of relaxing and having a good time
Quote:
Originally Posted by jtur88
There are several flaws in your story. First of all, Jim doesn't have $9 to put in your bank, he has $9 to pay his bun supplier and his counter girl, and if he's lucky, $1 to put in your bank. Second, you have not created wealth, you have just put wealth in your drawer. That $10 still belongs to Mr. Investor, and when he and Jim come to get it back, the wealth that you "created from nothing" goes back to being nothing again. It's called a run on the bank, and it happens when Jim and Mr. Investor (and, sadly, you) discover that you did not create any wealth at all. You just bought a big cigar and said you did, and now you're jumping out of an upstairs window.
The fact that three people all claim to own the same dollar bill doesn't make it worth $3.
But my example is exactly the system we have today.
Tell me jtur - what IS money anyway? After you realize the answer to that question, it is easy to see how value can be created from nothing.
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