The Stock market

Who says that every man and woman is entitled to free money (8% yearly return) on money they put in the stock market? The excuse "risk merits reward" does not work, because nowadays people truly believe that a rounded pick of stocks will make from 6-10% (or more) every year. When the market takes a dive, everyone feels cheated. I thought that risk was part of the game? But no, people genuinely feel that it is realistic and normal to make money while doing absolutely nothing. "It's my money making money," they say. But how can money make money? Only people can produce the goods and services which have a dollar value. A 10-dollar bill today is a 10-dollar bill next year. Money is not productive by itself.

There are a few small exceptions—if I borrow $1 million for a printing press, I might be able to produce items of value—actual wealth—with that press, and I can share that newly generated wealth with the people who lent me the money. That is the theory behind interest on productive loans.

But how much money raised by the likes of Google and other technology IPOs goes to build machines which will directly generate new wealth? Not very much. A lot of money is spent on advertising, litigation, research, personnel, non-producing equipment, vehicles, overhead, interest, etc. which does not have any kind of return. So a lot of money put into the stock market is NOT productive. An 8% annual return has to be artificial. It must be supply and demand—when a large number of people compete to buy the same shares, it drives up the value of each share. The stock might not be worth that much, but what does that matter to most people? Everyone wants to retire, and what better way to do so than to take one's savings and invest it in the stock market where anyone can earn 8% a year?

Now if money invested in a company can hardly earn an 8% return, then how can interest on non-productive loans such as home mortgages, car loans, personal loans, and credit card debt be justified? Simply put, it cannot. It takes money out of the economy, which is not replaced. Unless the Government borrows more money from the Federal Reserve (to fight a war, etc.) then the money supply contracts until you have a recession, and eventually a depression.

If I was producing wealth with that car loan, it would be OK to suck $150 out of the economy every month in interest, since I would be producing wealth at the same time. But who makes money off their car? Except for cab drivers, no one! Multiply that $150 a month by the number of loans each person has, then multiply that by the number of debtors in America (or the world) and you can see how much money the bankers are siphoning from the economy on a yearly basis.

But back to the stock market: Yes, some money can be made there. But you should expect 2-4% a year, not 8-10%—and there is a real risk that must be considered. At times (such as right before a crash) it is like a huge Ponzi (pyramid) scheme, where the average Joe ends up being the one holding the bag. Many people do not consider this. The average middle-class worker is the one who ends up losing—because they never "get out" in time before a crash. The huge investors know when something is going to happen (or they are about to make something happen), and get their money out ahead of time. The
poor people do not have this kind of "insider information", so they end up losing. Ponzi schemes only benefit the creator, and the first few people to join. They make their big money, but eventually the market gets saturated and the last people to join end up paying the bill.

Corporations are always looking to make more profit, which is their only goal. How much damage has been done to society by corporate greed? It is hard to say. But it is true that the corporation itself only exists to make money for the shareholders. The individual employees might have decent morals, but as a group they follow the will of the corporation which is always to make (more) money. And they often succeed—passing on some of the loot to the shareholders.

Individuals make money as well, but they do so for a different reason. Most individuals earn only what they need to live on (plus some savings for retirement). They have far more noble motives ("supporting my family", "doing what I was meant to do with my life", etc.)

So are the shareholders guilty for the various injustices perpetrated by corporations, in the name of "a more profitable 2nd quarter"? Somewhat. It is true that the gross violations of human rights (such as Wal-Mart's encouragement of the slave-labor conditions at its factories in China) can be blamed on this or that executive—but it is nevertheless true that they are all motivated by the fear of a lackluster quarter. They fear what would happen if they improved conditions in China, at a cost to their bottom line. What would happen to Wal-mart if their profits went down? The shareholders would all be angry and yell, "My mutual fund only made 4% thanks to your 'moral behavior'! A 1-year CD would have given me 5%! I expected to make 8% this year—I gotta retire next year at 50,
you know! You idiots are putting all my retirement plans on hold!"