Peace. Progress. Social Development. (Part 2 of 3)
In the sphere of economic progress.
In the world into which economics was born, an advanced theory for economic progress was found. In the advanced countries, increased production is an alternative to redistribution. It has been the great solvent of the tensions associated with inequality and it has become the remedy for the discomfort, anxiety, and privation associated with economic insecurity. No other question in economic policy is ever so important as the effect of a measure on the distribution of income.
The greatest source of insecurity lay in competition and the free and unpredictable movement of competitive market prices. Supply and demand is one of the most fundamental concepts of economics and it is the backbone of a market economy. Demand refers to how much of product or services is desired by buyers. Supply represents how much the market can offer. The relationship between demand and supply underlie the forces behind the allocation of resources. In market economy theories, demand and supply theory will allocate resources in the most effective way possible.
In a competitive market, price will function to equalize the quantity demanded by consumers and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity. The basis of a simple market is easy to understand taking into account that demand and supply are both defined and permanent under non-manipulated conditions. With prices of products and services produced by companies everything is clear.
They are taking into account the demand of the market and in accordance with this they put on the market a definite quantity of production (goods) and determine the price, which provides reimbursement of social economical necessary expenditure of production and to obtain profits, providing subsequent development of production and gives an incentive to stimulate good results.
A different situation is established in the futures markets of commodities. The futures market is the price setter and speculative dollars are driving up the price of future contracts and the commodities itself. This can be clearly demonstrated by the example of crude oil.
We have a few huge companies competing with national governments in acquiring oil, for processing (refining stage) there are huge barriers for entry, then they all fix the price in harmony. How is that a free market in any sense? It is a product that should be heavily regulated by any reasonable measures.
There is too much market power in too few hands on a product that is almost a necessity in the modern world. In addition to this the traders (speculators) play not an insignificant role of misrepresenting the demand and correspondingly on the level of prices. Using their predatory interest, artificially raising the demand, they influence the increase of prices, doubling and speeding up the inflation process. The influx of their capital in the future markets of commodities drives up these prices. The observation of lately shows, that just speculation drove the prices of crude oil to a record high of 145 dollars a barrel. This price is two times higher than last year. What happened?
The demand for oil increased two times, or the supply decreased accordingly. Neither one, nor the other took place. If one is buying oil futures as an investment commodity play then 75% oil future capital gains tax will hurt no one, but will eliminate speculators of this vehicle. This will improve the situation with the defects of the capitalistic system, which has been increasingly robbing our population of its benefits.
This defect of capitalism is now threatening its existence, since inflation strikes the economy at the point where it is the most vulnerable.
Corporate America is the best example of an economic system in the world. USA has a high rate of new business starts, it breeds a constant flow of new high impact firms, the kind that create value and stimulate growth by bringing new ideas to the market, be they new technologies, new business methods, or simply new and better ways of performing routine tasks. To maintain the rate of growth of production, there is a need of additional investment of capital.
The invention of contemporary economy is to issue public companies stock to accumulate large funds necessary for investment in developing new products and the expansion of existing ones. This creation in essence altered the economical system of the USA into a people's capitalism.
By investing their savings and pension funds in stocks, working people expect to get a share of corporate profits in addition to their earnings. It is reasonable that such profits go hand in hand with some risk of failure within a few companies. Besides, they help corporations fulfill their needs for a constant increase of production.
These stock prices need to reflect the results of the public companies activities and fluctuate within the boundaries of collected profit (losses) for every issued stock. As a result, the price of a stock becomes a derivative of fluctuating profits.
Over the long term, stock prices rise in line with earning per share. The profit (losses) of companies reflect a complete and final result of their activities, taking into consideration the quantity and quality of production, its sales, productivity, cost price and other economical, political and social changes for a corresponding period.
Therefore, it is unacceptable that the daily abrupt, not well-founded ups and downs can scare away investors from buying stocks. Stocks are not goods, but valuable papers, which reflect the accumulation of profits on a definite date.
The price of stocks should be determined by the public companies by means of book-keeping calculations, by adding the profit of a given quarter divided by the amount of shares, to the price of the stock from the time when the stock was issued i.e. initially public offering. Thus not the stock market, but the corporations set up the price of their stocks, and bear the full responsibility of their substantiation.
The massive transformation in information technology allows the reorganization of the stock market by carrying out of all operations by a central firm. The whole job will be done by computers. By pressing the button on the computer, the investor will be able to buy or sell stocks for prices set up by the corporations at present time. This will put the full responsibility on the corporations for rational movement of their stocks in the market.
One would think that such organization of the stock market satisfies the requirements of capital investment. In reality, the stock market operates on an order established 200 years ago, i.e. the price of a stock is what somebody is ready to pay for it. This way the traders (speculators) enrich themselves on the stock market on the account of volatile movements of stock prices. They make money when the prices go up and down, by means of increased frequency of buys and sells.
The investment business is a giant sc@m; it deletes billions of dollars every year in transaction costs. All they want is trade, trade, trade... They artificially violate the balance of supply and demand, so they can make every day millions of dollars, enriching themselves on the backbone of ordinary investors. For the average investor, this is certainly a sc@m. They know that big investors manipulate the market. If the existing order satisfies the requirements of the public, then those who, instead of investing, are engaged in buying and selling stocks, then a 75% tax on the profits from trading stocks (CAP gains) will hurt no one, but will force out speculators of this vehicle too.
Market forces can accomplish wonderful things but cannot ensure a distribution of income that enables all citizens to meet basic economic needs. The instability introduced by volatile financial markets threatens the normative foundation of the open society.
We need definite changes to reach stability in the market. It seems to us that the proposed changes in the order of working future commod
In the world into which economics was born, an advanced theory for economic progress was found. In the advanced countries, increased production is an alternative to redistribution. It has been the great solvent of the tensions associated with inequality and it has become the remedy for the discomfort, anxiety, and privation associated with economic insecurity. No other question in economic policy is ever so important as the effect of a measure on the distribution of income.
The greatest source of insecurity lay in competition and the free and unpredictable movement of competitive market prices. Supply and demand is one of the most fundamental concepts of economics and it is the backbone of a market economy. Demand refers to how much of product or services is desired by buyers. Supply represents how much the market can offer. The relationship between demand and supply underlie the forces behind the allocation of resources. In market economy theories, demand and supply theory will allocate resources in the most effective way possible.
In a competitive market, price will function to equalize the quantity demanded by consumers and the quantity supplied by producers, resulting in an economic equilibrium of price and quantity. The basis of a simple market is easy to understand taking into account that demand and supply are both defined and permanent under non-manipulated conditions. With prices of products and services produced by companies everything is clear.
They are taking into account the demand of the market and in accordance with this they put on the market a definite quantity of production (goods) and determine the price, which provides reimbursement of social economical necessary expenditure of production and to obtain profits, providing subsequent development of production and gives an incentive to stimulate good results.
A different situation is established in the futures markets of commodities. The futures market is the price setter and speculative dollars are driving up the price of future contracts and the commodities itself. This can be clearly demonstrated by the example of crude oil.
We have a few huge companies competing with national governments in acquiring oil, for processing (refining stage) there are huge barriers for entry, then they all fix the price in harmony. How is that a free market in any sense? It is a product that should be heavily regulated by any reasonable measures.
There is too much market power in too few hands on a product that is almost a necessity in the modern world. In addition to this the traders (speculators) play not an insignificant role of misrepresenting the demand and correspondingly on the level of prices. Using their predatory interest, artificially raising the demand, they influence the increase of prices, doubling and speeding up the inflation process. The influx of their capital in the future markets of commodities drives up these prices. The observation of lately shows, that just speculation drove the prices of crude oil to a record high of 145 dollars a barrel. This price is two times higher than last year. What happened?
The demand for oil increased two times, or the supply decreased accordingly. Neither one, nor the other took place. If one is buying oil futures as an investment commodity play then 75% oil future capital gains tax will hurt no one, but will eliminate speculators of this vehicle. This will improve the situation with the defects of the capitalistic system, which has been increasingly robbing our population of its benefits.
This defect of capitalism is now threatening its existence, since inflation strikes the economy at the point where it is the most vulnerable.
Corporate America is the best example of an economic system in the world. USA has a high rate of new business starts, it breeds a constant flow of new high impact firms, the kind that create value and stimulate growth by bringing new ideas to the market, be they new technologies, new business methods, or simply new and better ways of performing routine tasks. To maintain the rate of growth of production, there is a need of additional investment of capital.
The invention of contemporary economy is to issue public companies stock to accumulate large funds necessary for investment in developing new products and the expansion of existing ones. This creation in essence altered the economical system of the USA into a people's capitalism.
By investing their savings and pension funds in stocks, working people expect to get a share of corporate profits in addition to their earnings. It is reasonable that such profits go hand in hand with some risk of failure within a few companies. Besides, they help corporations fulfill their needs for a constant increase of production.
These stock prices need to reflect the results of the public companies activities and fluctuate within the boundaries of collected profit (losses) for every issued stock. As a result, the price of a stock becomes a derivative of fluctuating profits.
Over the long term, stock prices rise in line with earning per share. The profit (losses) of companies reflect a complete and final result of their activities, taking into consideration the quantity and quality of production, its sales, productivity, cost price and other economical, political and social changes for a corresponding period.
Therefore, it is unacceptable that the daily abrupt, not well-founded ups and downs can scare away investors from buying stocks. Stocks are not goods, but valuable papers, which reflect the accumulation of profits on a definite date.
The price of stocks should be determined by the public companies by means of book-keeping calculations, by adding the profit of a given quarter divided by the amount of shares, to the price of the stock from the time when the stock was issued i.e. initially public offering. Thus not the stock market, but the corporations set up the price of their stocks, and bear the full responsibility of their substantiation.
The massive transformation in information technology allows the reorganization of the stock market by carrying out of all operations by a central firm. The whole job will be done by computers. By pressing the button on the computer, the investor will be able to buy or sell stocks for prices set up by the corporations at present time. This will put the full responsibility on the corporations for rational movement of their stocks in the market.
One would think that such organization of the stock market satisfies the requirements of capital investment. In reality, the stock market operates on an order established 200 years ago, i.e. the price of a stock is what somebody is ready to pay for it. This way the traders (speculators) enrich themselves on the stock market on the account of volatile movements of stock prices. They make money when the prices go up and down, by means of increased frequency of buys and sells.
The investment business is a giant sc@m; it deletes billions of dollars every year in transaction costs. All they want is trade, trade, trade... They artificially violate the balance of supply and demand, so they can make every day millions of dollars, enriching themselves on the backbone of ordinary investors. For the average investor, this is certainly a sc@m. They know that big investors manipulate the market. If the existing order satisfies the requirements of the public, then those who, instead of investing, are engaged in buying and selling stocks, then a 75% tax on the profits from trading stocks (CAP gains) will hurt no one, but will force out speculators of this vehicle too.
Market forces can accomplish wonderful things but cannot ensure a distribution of income that enables all citizens to meet basic economic needs. The instability introduced by volatile financial markets threatens the normative foundation of the open society.
We need definite changes to reach stability in the market. It seems to us that the proposed changes in the order of working future commod
