Why does something have to be “done”? Is something “done” with the smart, talented and ambitious?
In the case of Jonas Salk, who developed the first useful polio vaccine, and refused to patent it for fear that might make it more expensive for the children he was aiming for…cheer, clap and thank an Indifferent Universe for the blessing.
Quite a lot, actually. There are government programs to help fund their educations and to help them start businesses.
Yeah, but the existence of the market helps makes stock a liquid asset, which it otherwise wouldn’t be, and allows money to flow in. Unless you’re proposing that people who buy a stock must hold on to it forever, allowing people to fund companies immediately necessitates a stock market. Your objection is void.
Cool. I am all for providing the same programs, under same conditions, to the stupid, mediocre and lazy, as to the smart, talented and ambitious.
Your perspective is not completely wrong, but it is incomplete.
When you buy $10,000 of stock instead of putting that money under your mattress, all other things being equal the average price of all shares worldwide will increase by $0.000000001 . That’s not much(!) so one needs to consider what happens in the aggregate and then examine behavior at the margins.
In the aggregate stock market wealth can be converted into cash wealth (call up broker and say “Sell”) and at the margins, stock market confidence funds new investment. Stated differently, even if the shares you buy are not part of an IPO, the funds you invest will eventually reach an IPO via a chain of buys and sells.
(But this is not to say The Market is God:trade_mark: blowhards are 100% right either. Truth lies along a Middle Way. 
)
Referring to your money that is invested in stocks as being “in the stock market” is an abstraction; it doesn’t literally mean you’ve deposited funds in some account where it will sit. While I’m sure there are people out there who think that’s what having money in the stock market means, for probably 98% of people who use the term, it is an abstraction, meaning that their money is invested in stocks. Stocks are exchanged in the market, thus ownership of stocks is putting your money in the market. It’s a useful shorthand, and nothing more.
The market is made up of people; this is a meaningless distinction.
So, how do you explain the numbers in your own cite:
Why is it that stocks performed so much better than gold and bonds? My answer is that stock prices are a reflection of the past performance and future value of the companies who issue stock. Their great success over the 200-year period results in stocks being a sound investment. Now, of course, prices will fluctuate as public perception of that future value fluctuates. Stocks can be undervalued, overvalued, or properly valued, but they do have value, obviously.
Where does “thin air” come into it, again?
While Salk was a great man, this one aspect of his legend is a myth:
They’re all richer except for the guy who paid a billion dollars for a pebble. Plus, the guy who had a billion to start with made things in the past to accumulate the wealth in order to be able to spend it all on a pebble.
In a lot of your threads, rich people just HAVE money and did nothing in order to earn that money. That’s the fallacy. People aren’t just randomly assigned money. It is earned. Even if they themselves didn’t earn it, someone in their family tree did.
Much in the same way valet drivers don’t “do” anything? You get to your car, and the valet just makes money along the way? Stockbrokers are facilitators. It’s a service industry. What they do is not arbitrary. It’s important. Financing corporations is important. Making use of unused money that otherwise sits in a vault is important and THAT’s why it’s the greatest money-making machine of all time.
You seem to be operating under the idea that the stock market is a singular market and money is being kept there. By that definition, no. There’s no money in the stock market. If you mean if the money that people are using is real? Yes. It’s absolutely real money.
Because the places that they move money to utilizes that money to expand. You can keep your rake in your garage and only use it once a year. OR you can use your rake and when you’re not using the rake, rent it to your neighbors to rake. That rake gets more use, your neighbors don’t have to pay full rake value for raking privileges, and you get money simply for letting your unused rake get used. It’s a rake-value-building machine.
Regardless is right. This particular rant has nothing to do with stocks. It has to do with bubbles. It’s a conversation completely divorced from your original questions.
I mostly agree. I’m unconvinced that the rationale behind lowering capital gains taxes is true. In theory, the lower the tax, the higher the investment, which means more money for corporations, and more jobs. That hasn’t been reflected in the trends. The 2nd part of your post is pretty much what the current progressive tax structure is, just with different nominal bracket amounts.
I’d venture to say that’s a stupid saying. Going from $100 in your pocket to $1000 is much easier than going from a million to 10 million.
What about the rest of us?
This was my first thought when I read the OP. The rational man that classical economics relies on is a fallacy. Behavioral economics is a better model and even then, it’s hard to predict the irrationality of when man decides to be rational or not. I wonder if there are any philosopher-economists out there wrestling with this idea and how it pertains to free will.
Well, let’s see. If you made $13/hour, and saved $4 @ 40hrs/wk 50 weeks a year… That’s $8000/year… That’s 31 years for an average-priced house.
Or if you saved ALL of your salary, you could do it in about ten years.
You left out interest.
The goal is to maxmize the revenue from the tax, and maximizing the rate does not always achieve that goal.
Capital gains are different from labor income in that investors generally have a lot more flexibility to put off a stock transaction into a future year or indefinitely. This is particularly true for the large chunk of the market that is owned not by wealthy individuals but by institutions such as pension funds. Thus, raising the capital gains tax rate incrementally leads to fewer transactions, and eventually, if it goes high enough, the drop in transactions can lead to a drop in overall revenue.
Labor income is less sensitive to this sort of timing, because people who work for a living generally cannot put off that income into a future year (since they need it to live).
This is not to say that the current capital gains rate currently is or is not the right rate to maximize revenue; this is just the theory as to why it is lower than the tax rate on ordinary income.
It’s a cheap house, and fairly small. But it’s mine. 
Car is paid off too- I accomplished that by not having one for 15 years.
I walked or rode a bicycle to work and everywhere else, in weather ranging from 0F to 100F.
There is another part of this, which is that earned income goes into your pocket today and is presumably spent today - or invested. When you invest money, you don’t take your profit until you sell - and some of that profit has been eaten up by letting it sit around - inflation. So a lower tax rate compensates for the loss due to inflation, otherwise investing and saving is far less attractive - and not investing and saving and spending every penny you have isn’t in the best interest of the economy as a whole.
Personally, I wish they’d index capital gains to some factor of inflation on a holding table. With computers, its easy enough to figure the gain on each individual holding.
Well, they don’t need the same programs, do they?
Right – but who would buy stock if you couldn’t sell it? Nobody. For a company to be able to sell a portion of itself to raise money for inventment in its business, that portion has to be resellable.
Yes and no. Capital gains comr from people who think the value of a portion of the company represented by one share is worth more than it used to be. People are often wrong in this regard, but in the long run, they’re right. When we invest in stocks, we hope that (a) the company will grow and continue to be profitable, and (b) people in the future will recognize that and want to purchase the stock for the same reason.
No, we’re hoping that people in the future believe that the shares of companies will be worth more, in terms of the company’s assets, ability to earn profits, and most importantly, grow more valuable in the future. The people of the future are under no obligation. If they don’t find our stocks to be worthy of investment, that will be our problem, not theirs.
By your logic, there is no “money” in anything, other than money. If you buy a house, where is the money? It’s in the hands of whomever sold you the house, of course. But your house still has value. That value depends on what others are willing to pay for it, just like stocks.
The market is simply the mechanism by which people fund things. Period. That’s all it is: a way for people to fund companies by buying portions of companies, and to cash in on their investments by selling those portions. The market doesn’t directly create wealth. It merely allows us to help fund companies.
The money we pay into the market usually doesn’t directly fund companies, other than via public offerings (when a company sells its stock, or gives it to employees as part of their compensation.) But indirectly it does help fund them, either by providing incentive for people to buy public offerings, for employees to want some of their compensation to be in terms of stocks or stock options, and improving the credit rating of the company.
You’re dead right on this. That’s why when we buy stocks, it behooves us to understand why a stock might be worth what it’s worth at this time in the market, and assess whether that’s due to overoptimism on the part of many investors (which by definition, it is, during a bubble). At one point JDUS’s “market capitalization” (the stock price times the number of shares outstanding) was so big it was bigger than all of the Dow Jones index companies put together. Was it really worth that much? I read an article that claimed it might, but as it turns out, it was worth about 0.1% of that. Eventually, the market figured it out, and JDSU tanked, despite continuing to be a profitable company.
That’s your perogative. However, it’s an inefficient allocation of resources. (That doesn’t mean it’s WRONG, it just means it’s inefficent.) In general, the smart, excpetional, hard-working people produce more than stupid, mediocre, lazy ones. The amount of resources to invest is limited. If we doled it out equally regardless of merit, society would end up with far less productivity for its investment. If we think that productivity is important, this is a reason to consider merit (potential productivity) when allocating resources.
No, the stupid and lazy need more. They deserve it, you know, because they are stupid and lazy.
… I should have added that this is a perfectly reasonable interpretation, as long as it’s applied to anything one buys. It’s not the common interpretation, simply because we have money invested in something. Is the money really “in” there? No. But can we get our money back? Sometimes. That’s all “having money in” means: it was used to buy something, and we hope to be able to get it back by selling that something.
Regarding stocks or real estate or investment-grade art or collectables, our money isn’t “in there” the same way it is in a piggy bank. We can shake the piggy bank and hear the coins rattle. They’re really there. With the others, all we have is the hope that someone else will find it valuable enough for us to get our money back (and hopefully with a profit).
Communist doctrine is:
By this standard, the stupid and lazy get more because they need more. This is a less efficient resource allocation method, but it might be perfectly valid based on a person’s value system. Unfortunately for people with such a value system, it might not be efficient enough to be viable. So far it looks that way, but I’ll grant that we may not have seen any reasonably good implementations of Communism.
It’s an example intending to show how market prices are created. Some people sit around a (metaphorical) table. They buy and sell something: a pebble, a Picasso, Pocahontes’s shoelace, a share of stock, some fluff from your pocket, the drinking water of Rio De Janeiro, or whatever), and at the end of the day they claim they “created” wealth.
The myth is: the stock market is the greatest wealth generating machine ever created. The reality is that is that bidding up the price of something does not create real wealth.