Subject: RE: Reply to Steven H. Johnson: Its my money
>From: Richard Arnold
>>>>"Soak up all the stocks on the U.S. stock market"? Give me a break. As long as people want to invest, I can guarantee you that there will be plenty of companies to invest in. It is exactly because of these investments that new technologies and new companies are booming.
You seem to have a very naive view of the markets. There was indeed lots of money flowing into the stock market in the late 1920's. Where did the boom times go then? It's all more complicated than you realize. If a lot of money floods into the market, what you have is a rise in prices for existing stocks. That really indicates nothing about the underlying fundamentals of the companies involved. It is a manifestation of the 'greater fool theory' i.e. I think I can find somebody else to pay even more than I for this stock than I did.
I am not criticizing the stock market. It is indeed the engine of our economic growth. I have money retirement monies invested in it myself. But it is not magic. It is not the goose laying the golden egg. People forming companies to attract investors and make a profit need to be able to attract consumer dollars. To the extent that the dollars they attract come from existing enterprises, there is no net growth in the economy. If we are trying to move from a 'consumption' pay as you go SS system to a 'savings' system, as many reforms propose, where are the consumer dollars coming from for these new companies' sales and profits?
