4 ms·

All this bs happens because we are allowed to used capital derived from financial profit to reinvest in financial transactions - leading to a vicious inflationa

by bawana 8y ago

All this bs happens because we are allowed to used capital derived from financial profit to reinvest in financial transactions - leading to a vicious inflationary cycle of increased valuations without increased value. The solution is to have two currencies. Financial currency (money derived from financial transactions (option redemptions, stock sales, hedge fund investment, etc) that can only be invested in the REAL world of products, services. OTOH, REAL currency (money derived from the sale of products[NOT FINANCIAL PRODUCTS] and services[NOT FINANCIAL SERVICES]) can be invested in anything. This simple gate will restore the synchronization between the financial and the real world. How did it come to pass that markets like the FOREX have an order of magnitude more 'value' that the non-financial product and non-financial service output of the entire world?

bawana 8y ago
who downvoted? some short seller? some day trader? somebody who doesn't work for a living but lives off the work of others?
- dang 8y ago
  This breaks the site guidelines. Please review them and follow them when posting here. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
toss1 8y ago
Interesting idea, although it seems that it would more likely wind up forcing the creation of money-laundering schemes than doing real good. While it wouldn't really solve the activist investor issue, I favor a strongly time-based capital gains tax system, designed to favor long-term investment, over short-term financial extraction. The rate table might resemble: <1 minute = 95% cap gains tax rate <1 hour = 80% <1 day = 70% <1 week = 60% <1 mth = 50% <1 qtr = 40% <1 year = 30% <2 yrs = 20% <5 yrs = 10% <10 yrs = 5% >10yrs = 0 Obviously a mere first-draft, subject to tuning. But the general concept should be clear - the short end would eliminate the volatility, unfairness and flash-crashes created by submillisecond trading. The encouragement to the longer end would get everyone to think longer-term. The 0% for decade+ holdings would prevent a lot of silliness around inheritance (e.g., you inherit a few shares from your grandfather, and have no records or reasonable way to figure the cost basis, but are required to assert one). Of course, I doubt it would happen because it isn't in the short-term interest of the bankers.
- bawana 8y ago
  yes this reminds me of the 70s when marginal tax rates on short term income was as high as 90%. But the problem here is that the money from tax goes to worthless, fat, lazy, stupid, ancient, corrupt, ineffective politicians.And the trickle down to the people is as weak as the urinary stream from those decrepit politicians with prodigious prostates.
  - toss1 8y ago
    Yes, some of it goes to the politician's waste, but the trickle-down via government is FAR better than the trickle-down from merely expecting the extractive class to create jobs and maintain a robust middle class. Heck, when the tax rates were that high, we had: * the GI bill, enabling all vets to go to college for free, * built road systems like the Interstate highway system * built schools * built libraries * WENT TO THE MOON. Seriously, if you want to complain, you will find waste in absolutely ANY large organization, corporate, philanthropic or govt. -- it just comes with scale -- there's economies of scale and inefficiencies of scale. But it does not follow from the existence of nontrivial inefficiency/waste/fraud/etc. that large organizations and their projects are therefore worthless; only that improvements might be sought.
    - bawana 8y ago
      Back in those days, tax rates were raised to pay ofr projects. I am opposed to increased tax rates that are not specifically earmarked for a purpose. Yes we went to the moon, but that was driven by cold war politics. Yes we had other good things too - the GI bill, infrastructure investment, etc. I'm all for that. Perhaps my vitriol got us off topic. I just feel that taxation is not the optimal way to redistribute financial profits. It's not sufficiently granular. And when we try and codify the granularity - we get a complicated, byzantine tax code that tries to accomodate all the 'nooks and crannies' that no one can really grasp. Rather, I would like to see a 'wall' in Trump lingo against the recycling of financial profits into more financial instruments which is just speculation. And an incentive for the reinvestment of financial profits into the REAL economy. Sure the ROI is greater in financial markets, but that is in large part because greater profits create greater demand for financial instruments which just raises their price.
icebraining 8y ago
So they'll just buy any crap and re-sell it immediately afterwards (for a small loss, if needed). Who does that benefit?
- bawana 8y ago
  Well, if they use financial gains to buy crap, then the seller of that crap benefits. Then the 'crap' market changes-demand decreases. If they want to sell crap - it wont be a small loss. And they cannot 'short' against buying crap. To make up for their 'crap' loss, they'll need to make more profit. And anyway, there are people who have to sell the crap, people to buy the crap, and people in between each transaction - more jobs.
  - icebraining 8y ago
    Currently some importer makes a profit from buying desktop fans in China or Vietnam, and selling them in the US and EU. Say the finance investors just use their Finance Bucks to buy those fans themselves, pay that importer to ship them and then they sell them to the companies that were already buying the fans from the importer, getting Real Bucks back. Literally nothing in the real world changed, except the importer now gets a bit of extra cash (probably almost nothing, since it doesn't cost him/her anything) to allow those investors to "own" those fans en route. There's no extra jobs, and the demand for fans hasn't really changed. What's the point?
    - bawana 8y ago
      Well, the importer who would have spent his money on the fans now spends it on something else. The Finance bucks are now recirculated into the REAL economy.
      - icebraining 8y ago
        They don't have that money to spend, because that money came from the sale of the previous fans, but now it's the investors that are selling them. Before: Importer spends $100 to buy the fans, spends $10 to ship, gains $150 from sale. Net: $40 Now: Finance guys spend $100 to buy the fans, pay $50.01 to the importer to ship them, then sell them for $150. Net (for the importer): $40.01. The finance guys are down $0.01, but they get Real Bucks from that. The real economy gained a mere penny. It just added complexity to the whole thing, for no real gain.
lordnacho 8y ago
I get the feeling such a system would just be a bonanza for accountants. It's probably a lot harder to define the distinction between financial and non-financial than it seems. What's to stop someone from trading something like forward agreements? So for instance I can sell you 1M backrubs, which are non-financial, to be delivered in a year? And you then sell those on to someone else? Now you've taken a non-financial thing and turned it into paper, just like we currently do with all sorts of things.
- bawana 8y ago
  that's an option. When you sell such a 'potential service at a fixed future price to actually buy it' you are not ACTUALLY buying the product. In fact, options have been a windfall for this inflationary debacle we are in. You might argue it's fueled the silicon valley miracle, but really it's only bait. People going into CS courses because of the 'option' to make money. When in reality, the industry needs code monkeys so how do you attract them? It's a form of dishonesty tricking people into doing what they dont really want to do for money. And when they are rudely awakened, they feel justified in even worse usurious behavior.
  - lordnacho 8y ago
    Sure, I get what you're saying. But aren't you making it worse by trying this particular intervention? Chances are wealthier, better connected people have better access to whatever the workaround is. Just like with tax.
    - bawana 8y ago
      indeed, lawyers would find some offshore or foreign loophole where this restriction does not exist. Financial money would find financial instruments in other nations - Germany, France etc. Why do Apple and Google keep so much money offshore? The same can be said for any tool whose purpose is to redistribute income. But the reinvestment of financial gains in the REAL economy is ALREADY happening. We call that phenomenon a 'startup' and those who are doing it are angel investors and VCs. I just want to formalize it out of silicon valley to the rest of the US, to the rest of the industries, to the rest of the nation. Heck, why not get creative and have a kickstarter for building 'smart roads' - you know roads with built in telemetry that would make self driving cars a cinch. Sounds outlandish? Well building interstate highways back in the way was equally outlandish. If there was a restriction against financial reinvestment of financial profits, and maybe a tax credit for investing in the REAL economy, we would see these things happen. The tool of taxation and the bureaucracy of redistribution would be sidestepped and the money would go more directly to the REAL economy.

by bawana 8y ago

bawana 8y ago

who downvoted? some short seller? some day trader? somebody who doesn't work for a living but lives off the work of others?

dang 8y ago
This breaks the site guidelines. Please review them and follow them when posting here. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html

toss1 8y ago

Interesting idea, although it seems that it would more likely wind up forcing the creation of money-laundering schemes than doing real good. While it wouldn't really solve the activist investor issue, I favor a strongly time-based capital gains tax system, designed to favor long-term investment, over short-term financial extraction. The rate table might resemble: <1 minute = 95% cap gains tax rate <1 hour = 80% <1 day = 70% <1 week = 60% <1 mth = 50% <1 qtr = 40% <1 year = 30% <2 yrs = 20% <5 yrs = 10% <10 yrs = 5% >10yrs = 0 Obviously a mere first-draft, subject to tuning. But the general concept should be clear - the short end would eliminate the volatility, unfairness and flash-crashes created by submillisecond trading. The encouragement to the longer end would get everyone to think longer-term. The 0% for decade+ holdings would prevent a lot of silliness around inheritance (e.g., you inherit a few shares from your grandfather, and have no records or reasonable way to figure the cost basis, but are required to assert one). Of course, I doubt it would happen because it isn't in the short-term interest of the bankers.

bawana 8y ago
yes this reminds me of the 70s when marginal tax rates on short term income was as high as 90%. But the problem here is that the money from tax goes to worthless, fat, lazy, stupid, ancient, corrupt, ineffective politicians.And the trickle down to the people is as weak as the urinary stream from those decrepit politicians with prodigious prostates.
- toss1 8y ago
  Yes, some of it goes to the politician's waste, but the trickle-down via government is FAR better than the trickle-down from merely expecting the extractive class to create jobs and maintain a robust middle class. Heck, when the tax rates were that high, we had: * the GI bill, enabling all vets to go to college for free, * built road systems like the Interstate highway system * built schools * built libraries * WENT TO THE MOON. Seriously, if you want to complain, you will find waste in absolutely ANY large organization, corporate, philanthropic or govt. -- it just comes with scale -- there's economies of scale and inefficiencies of scale. But it does not follow from the existence of nontrivial inefficiency/waste/fraud/etc. that large organizations and their projects are therefore worthless; only that improvements might be sought.
  - bawana 8y ago
    Back in those days, tax rates were raised to pay ofr projects. I am opposed to increased tax rates that are not specifically earmarked for a purpose. Yes we went to the moon, but that was driven by cold war politics. Yes we had other good things too - the GI bill, infrastructure investment, etc. I'm all for that. Perhaps my vitriol got us off topic. I just feel that taxation is not the optimal way to redistribute financial profits. It's not sufficiently granular. And when we try and codify the granularity - we get a complicated, byzantine tax code that tries to accomodate all the 'nooks and crannies' that no one can really grasp. Rather, I would like to see a 'wall' in Trump lingo against the recycling of financial profits into more financial instruments which is just speculation. And an incentive for the reinvestment of financial profits into the REAL economy. Sure the ROI is greater in financial markets, but that is in large part because greater profits create greater demand for financial instruments which just raises their price.

icebraining 8y ago

So they'll just buy any crap and re-sell it immediately afterwards (for a small loss, if needed). Who does that benefit?

bawana 8y ago
Well, if they use financial gains to buy crap, then the seller of that crap benefits. Then the 'crap' market changes-demand decreases. If they want to sell crap - it wont be a small loss. And they cannot 'short' against buying crap. To make up for their 'crap' loss, they'll need to make more profit. And anyway, there are people who have to sell the crap, people to buy the crap, and people in between each transaction - more jobs.
- icebraining 8y ago
  Currently some importer makes a profit from buying desktop fans in China or Vietnam, and selling them in the US and EU. Say the finance investors just use their Finance Bucks to buy those fans themselves, pay that importer to ship them and then they sell them to the companies that were already buying the fans from the importer, getting Real Bucks back. Literally nothing in the real world changed, except the importer now gets a bit of extra cash (probably almost nothing, since it doesn't cost him/her anything) to allow those investors to "own" those fans en route. There's no extra jobs, and the demand for fans hasn't really changed. What's the point?
  - bawana 8y ago
    Well, the importer who would have spent his money on the fans now spends it on something else. The Finance bucks are now recirculated into the REAL economy.
    - icebraining 8y ago
      They don't have that money to spend, because that money came from the sale of the previous fans, but now it's the investors that are selling them. Before: Importer spends $100 to buy the fans, spends $10 to ship, gains $150 from sale. Net: $40 Now: Finance guys spend $100 to buy the fans, pay $50.01 to the importer to ship them, then sell them for $150. Net (for the importer): $40.01. The finance guys are down $0.01, but they get Real Bucks from that. The real economy gained a mere penny. It just added complexity to the whole thing, for no real gain.

lordnacho 8y ago

I get the feeling such a system would just be a bonanza for accountants. It's probably a lot harder to define the distinction between financial and non-financial than it seems. What's to stop someone from trading something like forward agreements? So for instance I can sell you 1M backrubs, which are non-financial, to be delivered in a year? And you then sell those on to someone else? Now you've taken a non-financial thing and turned it into paper, just like we currently do with all sorts of things.

bawana 8y ago
that's an option. When you sell such a 'potential service at a fixed future price to actually buy it' you are not ACTUALLY buying the product. In fact, options have been a windfall for this inflationary debacle we are in. You might argue it's fueled the silicon valley miracle, but really it's only bait. People going into CS courses because of the 'option' to make money. When in reality, the industry needs code monkeys so how do you attract them? It's a form of dishonesty tricking people into doing what they dont really want to do for money. And when they are rudely awakened, they feel justified in even worse usurious behavior.
- lordnacho 8y ago
  Sure, I get what you're saying. But aren't you making it worse by trying this particular intervention? Chances are wealthier, better connected people have better access to whatever the workaround is. Just like with tax.
  - bawana 8y ago
    indeed, lawyers would find some offshore or foreign loophole where this restriction does not exist. Financial money would find financial instruments in other nations - Germany, France etc. Why do Apple and Google keep so much money offshore? The same can be said for any tool whose purpose is to redistribute income. But the reinvestment of financial gains in the REAL economy is ALREADY happening. We call that phenomenon a 'startup' and those who are doing it are angel investors and VCs. I just want to formalize it out of silicon valley to the rest of the US, to the rest of the industries, to the rest of the nation. Heck, why not get creative and have a kickstarter for building 'smart roads' - you know roads with built in telemetry that would make self driving cars a cinch. Sounds outlandish? Well building interstate highways back in the way was equally outlandish. If there was a restriction against financial reinvestment of financial profits, and maybe a tax credit for investing in the REAL economy, we would see these things happen. The tool of taxation and the bureaucracy of redistribution would be sidestepped and the money would go more directly to the REAL economy.