Quote:
Originally Posted by Raev
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It's just incredible to watch you blame the failures of government on the free market. I'm going to take 20 minutes out of my day to explain 'carry trading' to you. A carry trade works like this: - Borrow 100 million in JPY from a Japanese bank using 5 million in collateral
- Use money to buy US dollars and then US stocks (or bonds, or EM securities, or whatever)
- Watch asset go up because everyone else is doing the same thing
- Sell stocks/bonds for 125 million. Buy back devalued yen for 75 million. (USDJPY has gone from 75 to 120+ over the past three years)
- Make 50 million profit on a 5 million investment, or 1000% nearly risk free over a few years
Or, let's say you don't like carry trading. You're the CEO of Alcoa. You decide you like money. So: - You borrow 1 billion from a bank at 0.25%
- You buy back 10% of your stock.
- Suddenly your earnings divided by net capitalization are 10% higher
- Share prices rise, and you cash in your stock options for 20 million
The 0.1% have been making money hand over fist because of government controlled central bank free money. Even if all you do is buy SPY/QQQ, you just made 150% on your investment over the past 5 years, taxed at 20% capital gains. The poorest 20% don't benefit from this, because they are too poor to invest in stocks and bonds. If the central banks stopped printing, none of this would be happening.
How exactly do you consider this to be 'unrestricted capitalism' ? |
Yep, you've found one way in which financial institutions use non free-market mechanisms to make money. Many more exist, and it's beside the point. Government and the elite have colluded in many ways to precipitate this situation. That's what you get when political representation can be bought with money.
Let's look at this from premises to conclusions:
Premise 1: The more capital you have, the easier it is to get more.
Premise 2: The free market has no mechanism to prevent wealth from becoming concentrated in the hands of the most successful individuals or organizations.
Conclusion: The free market can't save the middle class from the current situation, because it can only remove barriers associated with premises #1 and #2.
Which of these is wrong? The concentration of wealth is a universal constant in human history, and it's one of the realities of capitalism. It is only New Deal type socialist institutions, and the labor movement toward unions, that have only slightly countered this during the last 100 years or so. Now those institutions are failing. The labor movement is almost nonexistent in the US. The government primarily serves the economic elite. I'm not focusing on how it became this way, but how we fix it. What aspect of free market economics do you believe has the capacity to effect redistribution?
Why is it that countries with strong labor movements and more socialist governments aren't having their middle and lower classes plundered like we are?