I think there is one. Investment means taking good real money and lending it to business enterprises to build factories,power stations, and pipelines, purchase machinery, aircraft, motor vehicles, and ships, to buy inventory, stuff that grows the business. Gambling is fun, but the money doesn't go to finance business, it goes back and forth between players. To keep the economy growing we need to encourage investment and discourage gambling with laws, regulation, and taxes.
The stock market makes investment in stocks attractive, mostly because investors can sell their stock for cash, anytime. And quickly, call your broker, and the sale will go thru that day or the next, and the cash will be in your checking account in another day or so. That's liquidity, and it vastly increases the desirability of stocks as an investment. And companies can issue and sell stock, raising cash for merely printing a stock certificate. If you are starting a company, the ability to issue company stock to raise money is a real boon.
And then we have those things that are mostly gambling. The morning NPR news regularly reports "Dow futures are up (or down)". I don't really know just how Dow futures work, but I seriously doubt that any of the money that changes hands gets to businesses for investment. I think the money just goes back and forth between financial players. Pure gambling. Same goes for "derivatives" another poorly understood (at least I don't really understand them) financial deal which just passes money around among players.
We always need more investment and less gambling.
No comments:
Post a Comment