Forcing "investors" to truly invest

[phantom power]

Mr. Geoghegan leads us, then, to the brink of Austrian economics via Keynes himself. But then, just as a progressive reader begins to be inclined to toss the article aside and wonder what happened to the progressive Thomas Geoghegan we used to know, he does a quick turn to highlight what he, by way of Keynes, sees as the real problem: the fact that Wall Street and the wealthy have stopped actually investing in productive investments. His argument has a subtle beauty and a ring of truth to it

The real point is to get them to invest—not save, not speculate in financial instruments, but invest in widgets we can wrap and ship and sell abroad. And Keynes would put that question to the left, to us: How can we get the rich to invest?...

Everything in the United States is set up to encourage the rich to put money into financial instruments rather than long-term investments. What would Keynes do? Get the rich to think outside the Wall Street banking box. Get them to put money into the part of Main Street that used to trade abroad. How do we do that? For starters, put in usury laws—limits on interest rates. In a general way, cut down the appeal of being a creditor and not an investor.

http://www.thenation.com/article/163673/what-would-keynes-do

And that's precisely the point: Wall Street is not actually engaging in productive activity on behalf of the economy. The entire reason that market speculation is supposed to help an economy, according to theory, is that markets are thought to provide the most efficient allocation of capital. But when rent-seeking and pointless lending speculation on paper assets is more profitable than actual investment in real productive activity, financial markets start to become more of a burden to an economy than an asset

http://digbysblog.blogspot.com/2011/10/forcing-investors-to-truly-invest-by.html

[phantom power]

1. One question on my mind -- if I loan money to a business, am I investing and/or rent-seeking?

[Turbineguy]

3. If you invest money in a business

you should be entitled to some benefit if the business succeeds.

[A HERETIC I AM]

4. There is a fundamental difference between "loaning" money to a business....

as in buying a bond, and investing in one, as in buying stock.

The two are not interchangeable.

Your statement "If you invest money in a business you should be entitled to some benefit if the business succeeds" is entirely correct.

If you loan money to a business, what you can and should expect is a higher level of safety than investing as well as a defined rate of return.

With bonds, this is for the most part the case.

With stock, it isn't.

[Turbineguy]

2. Wall street doesn't do investing any more.

Just trading. The commissions and fees are about the same as the total amount actually invested in real investments. In other words, fore every dollar invested, wall street takes a dollar. Derivatives divert money from real investments.

[ThoughtCriminal]

5. Maybe if stocks had to be held after buying for more than

a day as opposed to a few seconds would make it more like a market and less like a casino.