Author: White Whale

The way I understand stocks to work, is a company needs capital. It offers to sell part of the company to investors. Investors buy up pieces of paper–literal or virtual–for whatever the market will bear when the initial sale is going on. They go public at $15, then maybe it climbs to $30, maybe it drops to $5. You collect whatever money is invested, and that is now operating capital. In exchange for buying your stock, you periodically pay dividends.

Once the stock is sold once, it becomes a commodity in its own right. You may have bought it for $15, but now you the investor try to sell it for $20 and pocket the difference. This part of our market is, in my view, irrational and should be abolished.

Here is my reasoning: if buying low and selling high is the objective, then psychology enters the picture in addition to business fundamentals, and disrupts consideration of the actual value and performance of the company. What intrudes instead are guesses as to what everyone else will guess. What evolve in short order are synchronizing signals, that indicate buy or sell, not for intrinsic business reasons, but because they allow you better to predict what everyone else will do. It’s like a group of people on a boat at sea. They all rush to one side of the boat, then to the other, and the whole thing is never really in balance.

Concrete examples: layoffs used to signal buy. You saw “layoff”, and you knew everyone else would buy, and if your particular software was faster than someone elses, you could hit the float before it peaked, and sell before it dropped, pocketing the difference. This is stupid.

What it does is make good companies underfunded, and crappy companies that market well overfunded, until they go bankrupt after making fortunes they still keep, at least in part.

The bottom line is NOBODY IS MAKING ANYTHING. There is no business value to this, other than that it sucks money away from groups that are less predatory. Yes, stocks go up in time, but so does inflation. I don’t have the facts, but one could speculate–accurately in all likelihood–that most of the gains in the market over the last 100 years have to do with inflation. Stocks, like everything else, should not rise in value; what should happen is they pay better and more frequent dividends. At least, that is my belief for now.

My proposed solution is that all companies that want to go public determine the price of their stocks, based on how much money they want to raise. That, then, is the price. What will vary thereafter is how many are created. Say they need to raise $1 million. They offer to issue up to 200,000 $5 stock certificates. If they sell them all, then they get their money. Investors make money on the investment through dividends, which well run companies will pay more of, and poorly run companies less.

In effect, I am proposing converting stock issues to something like bond sales, except that you get variable “interest”, and voting rights. When you sell the stock, the price is still $5. That may seem contrary to free enterprise principles, but what we are wanting is stability that is not skewed in favor of the very rich. You can still buy or sell as you choose, and companies can still attract capital for expansion.

Particularly if we eliminate easy money, business fundamentals will have to be observed. Capital can still be raised, but the ridiculous fluctuations of the market–which self evidently can be influenced EASILY by large enough traders–go away.

Actually, let me dilate on that last point. If you own large parts of some stock, say Proctor and Gamble, if you sell enough of them at once, you can start a freefall. You short the stock, then sell your shares, and Wall Street being what it is, the fall will continue for some period of time. If you need to, you can partner with someone who sell short, and you then dump the stocks.

This sort of thing used to be routine on Wall Street. A group of men would literally sit around with brandy and cigars, and pick a stock, any stock. One would buy some, then another, then another. They would pay off a journalist to write something positive about the stock, which would appear credible since the price was climbing, so others would jump on. At some point, they would all sell, returning the stocks to something close to what they should have been valued, and in effect pocketing the money of everyone who bought late.

Again, this is wealth redistribution. Banking and securities laws have made it much harder, but far from impossible. The system is prone to corruption, serves no useful purpose in the manufacture of concrete things, and should be abolished in the way I suggested.

I have been wondering about this. Most of the “money” created, of course, is digital. It is an entry in a ledger. But obviously real money is out there too.

The best description I have found to date is here, from the Fed’s website. Go to page 34.

The way our system works is banks have to keep a certain amount of “real” money in reserve. They can either hold it in cash in their vault, or deposit it with the Federal Reserve. I think that amount is 10%, but varying required withholding is a basic feature of this cartel, where competition in that regard is formally forbidden under penalty of law.

What I think they can do is convert their reserves at the Fed to actual cash. They are also required by law–by the Fed–to keep a certain amount of cash in their vault. Obviously, that amount is not as high as the total reserves they are supposed to have.

So banks just place orders, that are filled regionally, and the cash is delivered in armored cars by men with guns. There are printing presses operated by the Fed, and paid for by interest and transaction fees system members pay. That part is interesting, too: the Fed is not tax-payer supported. If it were, funding could be cut, which would allow political pressure to be brought on it.

According to their own site, the “need” for cash grows over time, which is a function of inflation they create. Printing more physical cash, though, is a very unimportant means of this.

The other part of that table that I am still working on is what appears to be out and out accounting deception. Here is the actual text:

The amount of currency demanded tends to grow over time, in part ref lecting increases in nominal spending as the economy grows. Consequently, an increasing volume of balances would be extinguished,
and the federal funds rate would rise, if the Federal Reserve did not offset the contraction in balances by purchasing securities. Indeed, the expansion of Federal Reserve notes is the primary reason that the Federal Reserve’s holdings of securities grow over time.

What I think they are saying is that as inflation happens, money buys less, so people ask for more. If, they say, they did not inject money into the system so as to make sure there was enough, the cost of money between banks–the Federal Funds Rate, which is a means by which banks needing short term loans can get them from other banks in the system–would rise.

This appears to be bullshit. What is actually happening is the Fed buys securities, say Bear Stearns securities, for cash they don’t have. They literally just write a check, and as long as everyone agrees it was money, it will clear. This process is inflationary, since it creates money. On the back end, then, due to inflation, more people ask for cash, since the amount they hold is up, and the banks have to keep a percentage of that. So there is a relation, but as usual it is exactly backwards.

These people–well educated, wealthy, no doubt in many cases urbane, and certainly intelligent–are defrauding the American people right before our eyes. I have long ceased to wonder how people who knowingly do evil sleep at night. That is only a problem if you have a conscience. If you have no moral decency, you suffer no moral scruples, and you sleep just fine. Short of that, if you can just learn to lie to yourself, to convince yourself the bullshit you are peddling is solid gold, you can get much the same effect. People like that can and do wake up, though. We need them right now.

Consider this: the distinguishing economic characteristics of socialism are income redistribution, and centralized planning. Marx’s argument, in part, was that the chaos of free markets needed to be tamed, and central planning instituted. All vital industries, like energy production, railways, ship-building, and agriculture, were to be overseen by the State. Needless to say, this doesn’t work, since it fails to account for local information. Basically what happens is the systematic and inevitable exit of otherwise available information, which makes production irrational and inefficient.

To my point here, though, the Federal Reserve is in fact a means by which wealth is redistributed from ordinary Americans to the rich, and it utilizes central planning in the production of MONEY. How much to lend, to who, at what interest rate: one would think Congress could provide input on such large decisions; one would think voters would somehow be able to influence it; but we don’t and can’t. Such is the nature of the Beast.

As I pondered this, our actual inflation has been WORSE than 2,000% since 1913, if you consider that what SHOULD have been happening is that the buying power of the dollar was increasing. Thus, to the measurably lost value of the dollar must be added the increases in value that did not occur. Let us posit that the value of the dollar SHOULD have been increasing 3% per year, and instead decreased 3%. That is a 6% swing.

We should be working 20 hours a week and living well on that. We have been horribly, horribly misled. We should never forget that there is evil in this world, and it takes many forms.

I was drawing something the other day–a cowhorn trumpet I have had for many years–and noticed that I had stopped thinking. This is rare for most people, and unheard of for me. I chatter to myself all day every day.

I just stopped and looked at the wordlessness in my brain, and found it interesting and somewhat pleasurable. It felt like there was the possibility of opening a door there somewhere, that I had entered a room that was not well lit, but from which further progress was possible.

Given that the point of meditation in many traditions–notably Yoga, unless I am much mistaken–is to stop thinking, I would submit this might be a way forward that I have not yet seen proposed. Obviously, this is an effect of transitioning to the right brain, but surely meditation does the same thing?

One could simply alternate drawing, and contemplating the thoughtless space, trying to maintain it as long as possible.

I am still working my way towards working on a piece on Jacques Ellul’s book “Propagandas”, but felt a need to comment on one point here: propaganda is an anti-anxiolytic. It calms and soothes people, who view this as a desirable outcome.

For example, when Paul Krugman tells us confidently that we can spend our way into prosperity, many know on some level this is hogwash, but he is, after all, a Nobel Prize winning economist.

Or when Pres. Obama tells us that by increasing medical insurance costs and building a huge bureaucracy that our overall level of health will improve, the same people who think the government has money believe him. It all sounds so seductive, and people WANT it to be true.

One of the principal qualitative aspects of the indoctrination of our school children is teaching them that EXPERTS ARE ALWAYS RIGHT. Given this predisposition to take things on faith, lying simply involves getting the “experts” on board.

And to the point, here: that is what many people want. The anxiety they would otherwise suffer, of doubt and confusion, would be intolerable.

It occurred to me one could draw a basic relation between certainty and learning that I drew between money and wealth. If one is perfectly certain, one is incapable of learning, which I will define as perceptual movement. If one doubts everything–really, the acceptability of treating anything as a “fact”–then nothing is accumulated; there is no residual one might term “knowledge”.

The task, then, is to balance the two. It is a bit like walking. You have believe that in voluntarily falling forward the other leg will catch you. And one can treat all those bits we call facts as useful until they prove otherwise. Practical knowledge is what is useful, which in turn normally means observable and repeatable.

From the book “Viewing Violence”: “Violence on television is damaging to children. Forty years of research conclude that repeated exposure to high levels of media violence teaches some children and adolescents to settle interpersonal differences with violence, while teaching many more to be indifferent to this solution. . .

Children who are heavy viewers of television are more aggressive, more pessimistic, weigh more, are less imaginative, less empathic, and less capable students than their lighter-viewing counterparts.”

These are not speculation, but facts, to the extent any general statement about a human social system can be. Why is this issue not considered to be of vital importance? Quite literally, our future is being shaped by forces we do not control–except to the extent we turn the TV off–and which are pernicious.

I think most people who have travelled will agree with me that when you return to this country, one thing you note is how superficial people seem, how little emotionally engaged they are with the big issues of life. How impervious, in some ways, to poetry, and a capacity to “get” big works of literature.

This is not universal, obviously, but it is certainly something I noticed. The reason for this “fact”–which I am positing as subjective judgement–is that our media consumption patterns differ from other nations. Clearly, we are infecting other countries, exporting our own worst cultural impulses, but that virus can be contained with better programming, and/or less TV use.

What is the political impact of this? It seems to that anything that makes people pessimistic, less empathic, and more violent is going to create a pool of people vulnerable to recruitment in a “grand cause”, of precisely the sort the Left has in mind.

From that basic framework, you have people who are isolated socially. They know people, but not deeply, since their training has been in superficiality and an inability to express or even feel deep sentiments. Lacking compassion, they don’t develop deep attachments. Using violence as a solution, they push people away. Just look at the patterns of internet use by our young: aggressive, brash, stupid, inhuman in many ways. Their “connection” is striking out, preferably within a “community” of like-minded simpletons.

They are uncreative. They don’t have practice working through complex issues of profound importance. They are used to constant stimulation, not being the ones doing the stimulating.

All of this goes far beyond asking if movies showing explicit scenes of sadistic torture should be legal. This is not a First Amendment issue. What should be an issue is if we CARE what our future will look like. If we do, then such movies, when made, will not sell. That they do sell should be a cause for much concern.

As I was watching the sky on an intermittently cloudy night, it occurred to me that the stars are always shining, even when covered by clouds. Remembering they are there is an act of faith, but one backed by repeated experience. The first time they disappear, the child may doubt they will return, but they do. Likewise, all of experience troubles, but they end, or we learn to deal with them. The stars return, and we value them all the more for it.

I was watching the Ohio River a few weeks ago. One thing about it that has always interested me is that it always seems, on the surface, to be flowing in any direction except the direction it is actually flowing. Often, it appears, on the surface, to be going backwards.

It seems to me that often our perceptions work like this. We look at the surface only, and never dig deep enough to get at deep realities. Truth, itself, is a type of river. Things that work happen in systems in motion. They never operate with perfect consistency in social systems, since they are complex, but on balance they all flow in the same direction. Capitalism works, but it is not perfect. Democracy works, but it is not perfect. Flaws happen, water get stuck in eddies that never quite resolve themselves, but the eddies move, and different water composes them.

The whole task of perception is to look at the big picture. Had I thrown a float on the water, I would have seen soon enough what way the water was going, and researching social realities is no different.