The Financialization of the American Elite

Everything is smoke and mirrors. The price of a thing is completely determined by the perception of value and what people are willing to pay or sell at.

The problem with the glut of cheap credit is that it created the means to leverage capital on a scale that essentially embed rent seekers into every facet of life to the detriment of those without.

Those already with property were able to become landlords on a massive scale because credit was cheap, pushing up demand and pricing out those seeking their first home.

Fund managers were able to borrow massive amounts to buy into every business possible to the detriment of other business stakeholders and often the business itself. The economy as a whole suffered as generating quarterly returns and accumulating wealth trumped business growth and production. Because this occurred on a global level the social compact was broken.

I can only see two ways out of this:

A tax on wealth (70%+) might be the means to creating a "spend it or lose it" attitude and force the promised "trickle down" promised when the laws were changed to allow this aberration.

Or we need a multi-trillion dollar debt forgiveness program to reset the economy back to a place people are not so burdened by debt (from putting a roof over their heads, getting an education or requiring healthcare) that they can't afford anything.

Hmm...this article, along with Elizabeth Warren's recent proposals make me think that maybe the answer we ought to be looking at is something quite simple: Provide significant tax advantages to compensating employees with equity. If the problem is that employees are losing at the expense of shareholders...well, let's make them shareholders.

The history of the Spanish Conquistadors successful search for physical gold in the new world has been written and it is a period of inflation in Spain. Instead of focusing on bringing back real wealth from the new world (coffee, chocolate, tomatoes, potatoes), they brought back useless yellow metal that just caused inflation.

The idea is to match the money supply to the real wealth in the economy. I don't disagree with your assertion that we are seeing a decoupling of money from real wealth, but the gold standard is no guarantee against inflation - or worse, deflation.

Ok, ok, asset price inflation measured by the S&P 500 has been about 9% annually from $123 in 1982 to $2,920 in 2019. In addition, the availability of debt amplifies increases. For example, the Case-Shiller Home Price Index increased from 100 to 220 between 2000 and 2019 (about 4% annually), but owners often leverage 80% at the start, and they actually have a 13% annual return (less carrying costs)-- lets say double the nominal return.

If high finance generated a ROI of 9% x 2 on average since 1982, through asset price gains magnified by leverage ... that would be 64% every 3 years, on average for almost 40 years. That's a remarkable inflationary event, however you choose to define 'hyperinflation.'

You can't really make people into shareholders--at least not into successful investors.

The reason many (most?) people aren't shareholders is because they simply can't afford to save. You can't eat AAPL. You can't clothe your baby in JNJ. People should "pay themselves first" as savings but the reality for the normal person working 3 jobs in order to hold their household together is there's no room to pay yourself first--you barely make enough to survive. Even if you have $100 in your pocket at the end of the month, if you use it to buy a stock you're -10% right off the bat due to brokerage fees.

What are some ways a company can try to "make" their employee into one of the shareholder class?

Well, they can just give their employees company stock in lieu of some other compensation, but then the employee is stuck with this risky single-equity portfolio which they either need to sell (minus transaction fees and taxes) then use to buy some other diversified investment (minus transaction fees), or hold on to and risk being the next Enron casualty.

They can offer a 401K and even match contributions, but this requires the employee to deliberately elect to participate, which only makes sense if your basic needs are already met. 401Ks seem to mostly benefit middle class and affluent people who already budget for saving. Plus most 401K plans I've seen are loaded with expenses that eat a significant percentage of participants' savings.

Maybe the government can step in. People talk about Basic Income... Maybe instead of cash basic income offer basic equity: every American could be issued N shares of SPY every month or something. Let everyone have some basic baseline skin in the financial system game. This helps everyone benefit, not just employees.

Maybe instead of tax refunds being a big lump of cash, they can default to being issued as treasury bonds.

I don't know. "Tax breaks to corporation, hoping they in turn act nice" hasn't worked out very well for us.