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Which is a good thing to me. I’d rather people “work” to earn rather than easily collecting rent through interest. Work in quotes since applying capital in risk

Which is a good thing to me. I’d rather people “work” to earn rather than easily collecting rent through interest. Work in quotes since applying capital in risky investments is work compared to stashing money in an interest bearing account.

nostrademons 6y ago
Also shows why having everybody "earn" a living off interest & investment income isn't feasible - if everybody's doing that, nobody's doing the work that generates the cash to pay the interest in the first place. The best you could hope for is a younger generation of increasingly productive new workers being able to spin off enough profits to provide a return on the capital that generated that productivity. But the demographic time-bomb of relatively few Homelanders supporting relatively many Baby Boomers is going to upend that, and the stagnating productivity of the last couple decades isn't going to help.
jjoonathan 6y ago
Just as much rent is getting collected, but it's going straight to the top rather than into retirement plans.
listenallyall 6y ago
What? Putting money in an index fund, or buying Apple stock, or a 401k, is "work"? Companies don't even get the money from secondary stock purchases, so the invested money is doing absolutely nothing. Banks use deposits to create loans whose funds go directly to the companies receiving those loans. Banks which interview the loan applicants, review financials, ask for references, and which themselves tend to be pillars of the community (before the proliferation of national banks) and have a vested interest in helping it to thrive. So, no, your premise is 180 degrees wrong. Savers were once paid high interest rates precisely because their dollars were necessary to directly fund risky investments like a new business or expansion. The bank's function was to determine high vs low risk and allocate depositors' money efficiently. Meanwhile, buying an index fund or Amazon stock and having a few irrelevant proxy votes on decisions already made, is the definition of "stashing" it away with zero utility.
- aianus 6y ago
  > Companies don't even get the money from secondary stock purchases, so the invested money is doing absolutely nothing. There would be no IPO market without a secondary market. Almost nobody is interested in buying a stock at IPO and holding it forever without being able to sell it.
- javagram 6y ago
  > Companies don't even get the money from secondary stock purchases, so the invested money is doing absolutely nothing. But they can issue new stock at the inflated values to fund expansion, which itself allows the company to grow profits and potentially grow future dividends. E.g. Tesla stock price quadrupled over the last year and then Tesla issued $2 billion worth of new shares in February.
- eanzenberg 6y ago
  Putting capital in risky investments is “work”. Expecting a 7% guarantee return on capital is rent-seeking. There is a difference.
- chii 6y ago
  > buying an index fund or Amazon stock and having a few irrelevant proxy votes on decisions already made, is the definition of "stashing" it away with zero utility. that's absolutely not true. The buying stocks (or indirectly via index funds) must mean somebody else is selling. The person who sold the stocks will put the money obtained from the sale to use somewhere else. It moves capital just like any other economic transaction. It may be that the seller will "just" buy another stock - and it looks like nothing's changed. But eventually a seller down the chain is either going to invest in something other than stocks (e.g., a bond), buy new IPO stocks, or to consume the money (e.g., retiree selling stocks to fund their living cost). The problem with banks doing loaning is that they have to be conservative. They cannot loan out money that might not return - since they must return their depositor's money. Investors, on the other hand, do not have this conservatism (for the right price). That's why stocks exist, and that's why bonds exist (for those willing to risk less than stocks).
  - 6y ago
jkhdigital 6y ago
I think you would benefit from a course in how capital markets work.

nostrademons 6y ago

Also shows why having everybody "earn" a living off interest & investment income isn't feasible - if everybody's doing that, nobody's doing the work that generates the cash to pay the interest in the first place. The best you could hope for is a younger generation of increasingly productive new workers being able to spin off enough profits to provide a return on the capital that generated that productivity. But the demographic time-bomb of relatively few Homelanders supporting relatively many Baby Boomers is going to upend that, and the stagnating productivity of the last couple decades isn't going to help.

jjoonathan 6y ago

Just as much rent is getting collected, but it's going straight to the top rather than into retirement plans.

listenallyall 6y ago

What? Putting money in an index fund, or buying Apple stock, or a 401k, is "work"? Companies don't even get the money from secondary stock purchases, so the invested money is doing absolutely nothing. Banks use deposits to create loans whose funds go directly to the companies receiving those loans. Banks which interview the loan applicants, review financials, ask for references, and which themselves tend to be pillars of the community (before the proliferation of national banks) and have a vested interest in helping it to thrive. So, no, your premise is 180 degrees wrong. Savers were once paid high interest rates precisely because their dollars were necessary to directly fund risky investments like a new business or expansion. The bank's function was to determine high vs low risk and allocate depositors' money efficiently. Meanwhile, buying an index fund or Amazon stock and having a few irrelevant proxy votes on decisions already made, is the definition of "stashing" it away with zero utility.

aianus 6y ago
> Companies don't even get the money from secondary stock purchases, so the invested money is doing absolutely nothing. There would be no IPO market without a secondary market. Almost nobody is interested in buying a stock at IPO and holding it forever without being able to sell it.
javagram 6y ago
> Companies don't even get the money from secondary stock purchases, so the invested money is doing absolutely nothing. But they can issue new stock at the inflated values to fund expansion, which itself allows the company to grow profits and potentially grow future dividends. E.g. Tesla stock price quadrupled over the last year and then Tesla issued $2 billion worth of new shares in February.
eanzenberg 6y ago
Putting capital in risky investments is “work”. Expecting a 7% guarantee return on capital is rent-seeking. There is a difference.
chii 6y ago
> buying an index fund or Amazon stock and having a few irrelevant proxy votes on decisions already made, is the definition of "stashing" it away with zero utility. that's absolutely not true. The buying stocks (or indirectly via index funds) must mean somebody else is selling. The person who sold the stocks will put the money obtained from the sale to use somewhere else. It moves capital just like any other economic transaction. It may be that the seller will "just" buy another stock - and it looks like nothing's changed. But eventually a seller down the chain is either going to invest in something other than stocks (e.g., a bond), buy new IPO stocks, or to consume the money (e.g., retiree selling stocks to fund their living cost). The problem with banks doing loaning is that they have to be conservative. They cannot loan out money that might not return - since they must return their depositor's money. Investors, on the other hand, do not have this conservatism (for the right price). That's why stocks exist, and that's why bonds exist (for those willing to risk less than stocks).
- 6y ago

jkhdigital 6y ago

I think you would benefit from a course in how capital markets work.