Friday, August 21, 2015

China proves that nations don't need big stock markets.

China's stock market is a fraction of the size of the U.S. stock market. One-sixth or something like that. Yet China's economy is nearly as large or even bigger by some  measures than the U.S. economy.

Check out stock market capitalization comparisons here.

China is building high speed trains, new airports, power plants, buildings and all kinds of infrastructure while the U.S. is looking more and more like a Third World Country by comparison.

But...the U.S. has a HUGE stock market. Big deal. What's it give us? A casino for financial speculators to play in? Yeah, that's about it.

No need to have a huge stock market or huge financial sector. It's just a source of financial speculation and risk and it brings very little real return to the broader citizenry.


Random said...

There is a good quote at Stumbling and Mumbling blog (Chris Dillow):
"you're right that "people believe themselves incapable of making decisions", because that is what the ideology tells them. This is reinforced through the institutional obscurity of the financial system, the arcana of professional economics (excessive maths, a delight in paradox), and even pop-pyschology (from behavioural economics to CBT). Even Chris does his bit, over-emphasising the explanatory power of cognitive biases. People are taught not to tust themselves.

One of the central paradoxes of neoliberalism is that its emphasis on personal freedom and empowerment sits alongside an insistence that no individual (any more than a group) can better the information-management and decision-making of the market. In other words, we are urged to accept our innate incompetence and put our trust in the market as a higher power. This is why pollsters ask "who do you trust with the economy?", rather than "who would be most technically competent in managing it?". The implication is that Tories are less likely to go against the market, are therefore more in tune with its mysterious ways, and thus should be considered as more appropriate high-priests.

However, it does not follow that people thereby conclude "that there is a need for a class of people to rule over us". Some voters are certainly prey to deference, but that became a minor tendency as far back as the 1960s. It's equally plausible to conclude that this ambivalence - i.e. the conflict between a desire to take control of one's own destiny (as neoliberalism uges) and a fear that one may be incapable of doing so (because of the judgement of the market) - gives rise to resentment. The contempt directed at the bubble would seem to support that."
The Americans support things like the stock market because "market." Actually calling it a "market" (framing) makes that worse.

Ignacio said...

We have to invent things to do while telling ourself we are running out of money.

Is laughable people talks about 'roads to no where' when talking about govt spending but they don't talk about 'jobs that go no where', like the completely oversized financial industry.

But it is how it is, as we are ruled by mediocrity and stupidity, hence inventing jobs with no social purpose other than screw other people as much as possible and parasite their efforts.

Dan Lynch said...

@Mike I agree 100%. Wall Street is legalized gambling for the 1%.

lastgreek said...

Jack Bogle: "The job of finance is to provide capital to companies. We do it to the tune of $250 billion a year in IPOs and secondary offerings. What else do we do? We encourage investors to trade about $32 trillion a year. So the way I calculate it, 99% of what we do in this industry is people trading with one another, with a gain only to the middleman. It’s a waste of resources."

Why 99% of trading is pointless --

Ralph Musgrave said...

Adair Turner (former head of the UK’s Financial Services Authority) said something similar. He said that much of what the City of London does is “socially useless”.