Adam Smith on Wages and Wealth

[Myrddin]

Except that BUYING stock does not give any money to the company - investing in new issues does

Except that companies do not do new issues because it is more tax efficient to issue debt

So buy bonds if you want your capital to be invested productively

[Imran Siddiqui]

Except that BUYING stock does not give any money to the company

It does if you buy it from the company directly (ie, when stocks first come on the market). Like you said, new issues. And there are companies that do new issues. They don't all stay away from them .

--

Furthermore, isn't GDP a value showing goods and SERVICES? I don't know about you, Duncan, but I think that brokers provide a service.

[DuncanK]

Originally posted by Myrddin
Except that BUYING stock does not give any money to the company - investing in new issues does

Except that companies do not do new issues because it is more tax efficient to issue debt

So buy bonds if you want your capital to be invested productively

True, which brings us to when we have more people investing in bonds. This will create more money for companies to borrow to make investments in the means of production. This will also lower interest rates at the same time. How much lower can interest rates go? Maybe we have to do something on the demand side to keep interest rates from going to low. If we don't do that we may just face a liquidity trap. Maybe cutting out income tax will create that demand. I'm not sure yet that's why I started this thread

[DuncanK]

Originally posted by Imran Siddiqui
Furthermore, isn't GDP a value showing goods and SERVICES? I don't know about you, Duncan, but I think that brokers provide a service.

edit: I'm not going to argue with you about this anymore on this thread.

I will on another thread though

[Japher]

In Book 1, Chapter 8 he compares England to America. He says that England is by far the wealthier nation, but wages in America are higher because the wealth is used towards the production of goods and services.

This clearly shows that Adam Smith knew that there were types of wealth that did squat for the economy. We have these types of wealth today, namely the stock market. We should follow this advice and prevent wealth from accumulating where it will not be productive. We should have a good wealth tax that directs resources into greater production.

and

Let's try not to keep going back to the debate over the productive or nonproductive nature of stocks.

Then don't attack it.

Investing in the means of production is obviously a good thing. Bonds, stocks, T-Bills, etc... Almost any investment vehicle that exist does host that. Do you ever wonder what really makes these investments not only increase in value but survive? I will tell you... Production Values... Even with stocks. This is why, when investing in stocks, many people look at P/E and P/S ratios, they show how much production that company is performing.

Except that BUYING stock does not give any money to the company - investing in new issues does

Nope... and IPOs are bad investments.

Except that companies do not do new issues because it is more tax efficient to issue debt

No? They just split in order to increase their market cap., lower stock value, and attrack new investors because it looks good on paper.

So buy bonds if you want your capital to be invested productively

Do you not consider a bond as investing in a deficit and not in production values? I think so.

[Sten Sture]

Originally posted by Saras
You didn't offend anyone, you just don't have a clue

Where do you even start with a thread like this???

[DuncanK]

Originally posted by Imran Siddiqui
Furthermore, isn't GDP a value showing goods and SERVICES? I don't know about you, Duncan, but I think that brokers provide a service.

Well the income tax seems so popular that I might as well debate the stock market with you right wingers.

If I through a brick through your window (and I'm not going to do that ), and you pay some one to fix the window GNP has been increased. But did I help the economy by throwing a brick through your window?

[DuncanK]

Originally posted by Japher
Investing in the means of production is obviously a good thing. Bonds, stocks, T-Bills, etc... Almost any investment vehicle that exist does host that. Do you ever wonder what really makes these investments not only increase in value but survive? I will tell you... Production Values... Even with stocks. This is why, when investing in stocks, many people look at P/E and P/S ratios, they show how much production that company is performing.

It's very simple. You are confusing yourself.

If I buy a some stock from you you only invest that money in the means of production by coincidence. And so in that sense investing in stocks is investing some money in the means of production. In the same way if I buy some gold from you you will invest that money in the means of production by coincidence. Now are you saying that an investment in gold is an investment in the means of production?

[Imran Siddiqui]

I buy some gold from you you will invest that money in the means of production by coincidence.

Are you sure you are not confused?

If you buy stocks, someone else recieves that money. According to the marginal rate of consumption and marginal rate of savings, some of that money will be consumed and the rest saved.

It isn't coincidence. That money WILL be used.

you pay some one to fix the window GNP has been increased. But did I help the economy by throwing a brick through your window?

Maybe, maybe not. It depends on how the money was going to be used by you compared to how the money was going to be used by the window repair company.

So, it depends.

[DuncanK]

Originally posted by Imran Siddiqui

I buy some gold from you you will invest that money in the means of production by coincidence.

Are you sure you are not confused?

If you buy stocks, someone else recieves that money. According to the marginal rate of consumption and marginal rate of savings, some of that money will be consumed and the rest saved.

It isn't coincidence. That money WILL be used.

It is coincidence, because each time it's different. Sometimes the money is used to increase the means of production and sometimes it's not. The fact that the marginal rate of savings increases does not neccessarily mean that the savings will result in a greater production of anything. In fact it will probably result in less production, because of a decrease in demand.

Originally posted by Imran Siddiqui

you pay some one to fix the window GNP has been increased. But did I help the economy by throwing a brick through your window?

Maybe, maybe not. It depends on how the money was going to be used by you compared to how the money was going to be used by the window repair company.

So, it depends.

This would actually crowd out some other productive service. True it would be added to GNP, but not in a good way.

[Imran Siddiqui]

It is coincidence, because each time it's different.

I think you are misusing the word 'coincidence' and don't even realize it.

Just because it is different doesn't make it a coincidence. Does it happen at exactly the same time?

Sometimes the money is used to increase the means of production and sometimes it's not.

Tell me how sometimes it is not, while taking mpc and mps into account.

True it would be added to GNP, but not in a good way.

And GDP as well, after all it is a service.

[DuncanK]

Originally posted by Imran Siddiqui

It is coincidence, because each time it's different.

I think you are misusing the word 'coincidence' and don't even realize it.

Just because it is different doesn't make it a coincidence. Does it happen at exactly the same time?

Sometimes the money is used to increase the means of production and sometimes it's not.

Tell me how sometimes it is not, while taking mpc and mps into account.
And GDP as well, after all it is a service.

I'm not sure what you mean when you say 'taking mpc and mps into account,' but if mps increases its likely that the trading volumn will increase in the market. This will raise prices. There will be more money in the market.

Now unless there is a new growth market emerging there will not be an increase in business investment. Business investment would actually decrease. So the boom in the market would be followed by a possible recession. And then ofcourse, people would start selling their stocks causing a market crash. And then you would see mps increase and worse economic times to come etc....

[DuncanK]

Originally posted by Imran Siddiqui

It is coincidence, because each time it's different.

I think you are misusing the word 'coincidence' and don't even realize it.

Just because it is different doesn't make it a coincidence. Does it happen at exactly the same time?

Ok, let's just say that when people sell their stock they usually make another personal investment with the proceeds. This may be stocks, bonds, gold, land, etc... It depends on the economic conditions. Sometimes they start up a new business with the proceeds. And in this case the purchase of stock would be going into the means of production. But in the other cases it would not be (unless of course the stock purchase was first issue).

[Japher]

DuncanK a communist does not even bother to take the time to argue against capitalism... Are you a bonds salesman? Is that what your doing?

Investing, IMO, is definitly better than saving. Yet to argue over investment vehicles is always going to be ambiguous at best. Different people make different fortunes at different times with different investment vehicles.

Now unless there is a new growth market emerging there will not be an increase in business investment. Business investment would actually decrease. So the boom in the market would be followed by a possible recession. And then ofcourse, people would start selling their stocks causing a market crash. And then you would see mps increase and worse economic times to come etc....

Duh. Yet, even I can tell you that the worse type of economy is a stagnant one. All markets move with flow, there are highs and lows. The trick is to balance the flow, or in my case take advantage of it.

For the most part, if you don't understand the vehicle then you probably shouldn't drive. You can have your bonds, but I suggest that you stay away from stocks, seeing as you are completely confused on how they work.

Toodles

[DuncanK]

Originally posted by Japher
DuncanK a communist does not even bother to take the time to argue against capitalism... Are you a bonds salesman? Is that what your doing?

No, I don't sell bonds. We haven't even talked about bonds that much. If there were a wealth tax I think I would support a tax on bonds also. I don't support flooding the bond market either. I want to increase the direct investment in the means of production. More capital in the bond market wont necessarily do that. There is a thing called a liquidity trap. Anyway, if the interest rate is too high the Fed can just lower it.

As far as arguing about capitalism and communism, I mostly like talking about economics. You will be convinced of the shortfalls of capitalism when Bush ****s up the economy