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Chapter 7: The Society is Cheating Itself.Humanity has adopted many avenues for cheating itself, as for instance through free-trade; through war; through cultural, economic, and financial disintegration; through deindustrialization; through shutting down energy and infrastructural development; through shutting down health protection, justice, and humanist education; and of course, through the stockmarket. Appendix 11 illustrates the nature of the stockmarket. This market has a monetary inflow, and a monetary outflow, which are always equal. Contrary to popular perception, there is nothing IN the stockmarket, no matter how much money is poured into it. The following is the reality about the market. The marked doesn't take anything. The market doesn't give anything. The market doesn't create wealth. The market doesn't accumulate wealth. The market doesn't take away wealth. The market is a flow-through channel. Whatever flows in on the buying side, flows out on the selling side (less commissions.) In practice, a lot of the outflow instantly becomes new inflow as the returns from trading are generally 'reinvested,' less taxes and commissions. Whatever 'profit' is generated by this process is not generated in the market. There are no profits generated in the market. The so-called 'profits' from trading in the market are a type of loot generated in a con-game by which 'investors' steal from each other within the process of trading, or in most cases are stolen from by the professional sharks. The only real profit that can be gained through the market for investors, is the dividend "yield" that represents an investor's share in the profits from productive processes of the companies whose stock the investor owns. This profit, however, does not come from the market, it comes from the physical economy. When a crash occurs, the process indicated in Appendix 11 does not become altered by one single bit. There will still be an inflow of money into the market, and a corresponding outflow, minus commissions. The in and outflows still remain balanced. The only thing that changes during a crash, is the investor's perception of the value of the financial instruments sold in the market. The process is similar to the game of selling hats. The following is what one might see in a hat-trading market. The buyers and sellers appraise each other's hats. Those who buy hats may wear them for a day and sell them tomorrow. The various store-keepers, or 'investors' all sell high fashion hats. At the high point of the market, they get a high price for their hats from each other, and from the public. But there also comes a point when hats fall out of fashion. By this change in perception, the store-keeper's entire inventory get devalued to scrap. Naturally, some store keeper may find a few hats in their inventory that have some utilitarian value, like keeping the rain out of one's face when working in the garden. A few may even be lucky enough to sell their useful hats for a price that accords with the actual utilitarian value. The same happens in the stockmarket. The prices in the stockmarket may shoot up into the stratosphere when stocks are valued exclusively for their 'growth' potential through trading, but as the market values get bigger as stock-prices escalate, it also becomes necessary that ever greater amounts of monetary inflow are drawn into the market to maintain an attractive relative 'growth' which happens to be the only factor of interest, to 'investors.' As the game continues, there comes a point when the relative inflow of capital that is required to generate a perception of 'growth' is so large that the required capital can no longer be attracted into the market game. At this point investors look at their purchases and say to themselves: Why have I invested so much money into these 'investments' if I cannot get a decent return for what I have paid? This becomes especially agonizing if the banks or bonds begin to pay better returns. Consequently, the investor sells - that is, everyone sells. || - page index - || - chapter index - || - Exit - ||
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