Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : View from the Center and Left -- Ignore unavailable to you. Want to Upgrade?

To: TimF who wrote (94160)	11/5/2008 6:09:05 PM
From: Lane3	Read Replies (3) \| Respond to of 541403

What about this point: "The other flaw in trickle-down is that globalisation of the supply chain has meant that productive investment by the rich in the west is rarely directed into the home market: instead those new jobs that are created, are generally overseas where the associated costs and regulations are far lower. So cutting US tax rates is not going to create any significant number of new jobs in the US for this reason also. " The financial sector did get bloated, but its undergoing a correction It still seems like too much of the money of the rich is non-productive, bubbles notwithstanding.

To: TimF who wrote (94160)	11/6/2008 7:18:22 AM
From: thames_sider	Read Replies (1) \| Respond to of 541403

the main problem was misallocation of investment in the real economy. No, I disagree strongly. It's misallocation, perhaps, but into the unreal economy! Sure, hot money went into sub-prime loans - but look at the flip of the equation, where was this money coming from? There was demand from investors wanting AAA-rated bonds, including a disproportionate (because of leverage) amount of demand from absolute-return funds seeing this as a source of alpha. A lot of funds going for fixed minimum return would buy high-interest bonds with ~90% and then play derivative strategies with 10%. There's no productive growth involved anywhere even while this works, apart from (as you imply) a bubble in the construction industry which I would contend is not a sector that can realistically grow every year anyway. And other than sub-prime and similar too-risky lending, which still is dwarfed by the derivatives bets, what part of the real economy had misallocated investment in the last 8 years? [in the West, that is] Even the tech boom and bust left us with a huge skills reservoir, a high-tech infrastructure, vastly more companies and progress in the tech and telecoms sector, and far more widespread knowledge and enthusiasm for tech generally. Not forgetting Google. And there at least you could see the investment going in from VC and into IPO's, money was going to actual companies. Where's investment gone in the last 8 years? A few paragons aside, where have the rich put their money? Buffet et al notwithstanding, I don't see the 5% of people who now own close to 40% of US wealth buying US companies, growing them, creating new jobs there. Even when they do, it's people like Icahn trying for greenmail and financial re-engineering (which seems to be a epuhemism for "take on more debt, cut jobs and pay me back with a bonus"). Other than that, trophy assets, bigger houses and tax-sheltered holdings is where it's gone.