- Capitalism and Alternatives -

A few uninformed questions

Posted by: Gideon Hallett ( UK ) on May 05, 1999 at 17:05:12:

In Reply to: Schmoover! posted by Gee on May 05, 1999 at 16:36:28:

: : But the whole point is it can't bve, because of market saturation and a declining rate of profit, such money is ploughed back into land, stocks or curency, to try and make another big windfall. they've got money they can't use, so they gamble with it.

: A misunderstanding of the stock market. Its there to raise capital for fruitfall wealth cretion endeavours. Gambling doesnt pay.

So what happens to the endeavours that fail? Is the capital invested into those ventures non-existant? Did the South Sea Bubble never happen? Does the market just spiral up and up feeding off itself to an infinitely high level?

Or do crashes occur?

When the market crashes, the capital invested in the market decreases in fiscal value as well; shares go down as well as up.

Isn't that the reason for investment advisors and "experts"; to spot such trends and steer your invested capital clear of such pitfalls?

(but, given that the stock market is an exercise in non-linear dynamics, (or "chaos" if you like buzzwords); exact long-term forecasting of the market is ultimately as possible as exact long-term forecasting of the weather; it's also the reason why the financial institutions of the world are falling over themselves to employ non-linear mathematicians fresh out of university.)

As such; any expert is fallible; even given the best advice and the soundest stock, you cannot predict something like October the 17th 1987 before the event.

So, if you invest in the market aware that you may lose it all but willing to do so for the return-on-investment, in what way are you different to someone at the roulette table, using the equally unpredictable laws of many-body dynamics to try and net a profit?

(In fact there's a neat similarity; a roulette wheel depends both on initial conditions and the effects of chaotic interactions between the ball and its surroundings. A share price depends on initial conditions and the effects of chaotic interactions between the stock value and the investors.

...the stock market really is all a load of balls...)

: : Billions can disappear that way, it is damaging.

: More billions are made every year. Made.

Over what time period? And how can you weigh the fiscal benefits against non-measureable demerits, like cleaning up pollution, happiness of the population and levels of poverty?

And what happens when your market becomes overvalued and crashes?


(economics really isn't my speciality; but these questions seem to be obvious enough.)

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