this is a concerning trend, makes a strong case that a growing portion of the stock market is full of zombie companies that depend on outside financing to sustain themselves.
Was just listening to an investment podcaster I follow and he has been pointing this out for a long time. He would say this is a signal that we are not out of the woods and we may be in for a rough go economically. The stock market has been rallying but it could be hopium. Hope that the FED will lower interest rates. Hope that AI will magically make many companies more efficient and more profitable. I feel pretty strongly that we are seeing false growth right now in the stock market for the most part. That's my gut at least.
During the bull market I've had friends tell me why would you buy something that is going down in value? They are referring to bitcoin and the drop in market price. I always explain it like this. Because I have studied bitcoin and believe it is drastically misunderstood and undervalued. Many people invest in things strictly based on market signals and not underlying value. I suspect that MANY companies are overvalued currently OR they are going to have their market value drop a lot more based on their profit numbers.
When wealth concentration keeps money stranded, it stops generating wealth.
lets say there are 3 people and only two exchange money. the one excluded cant generate weath even if he works.. ( measured in fiat, i know, but nuts on your pocket doesnt count when we analyze economy )
Also, when we insist on maximize profits, and reduce costs, to an extreme, either the product or the worker have to become poor. this because the profit is considered sacred and have to increase every year..
Im not agains capitalism, im just saying we dont have the best practices and we probably can destroy the best system we had if we dont regulate some things
This entire paper is operating under the fixed pie fallacy.
In your example - assuming human nature still exists - the person can generate wealth by accumulating capital that will increase the efficiency of the other 2.
I will agree that there are inefficient markets due to information asymmetry. In these markets, certain regulations aimed at reducing information asymmetry can be beneficial. Often times there are market solutions for this, but sometimes it is just not feasible.
However, the vast majority of regulations incentivize corporations to lobby the government for protection and etc. If not, it is likely a regulation that will hurt its competitors.
I am trying to find it, but at one point I looked at research on minimum wage and start up success. It was something like a 1% increase in minimum wage leads to a 3% reduction in start up success. Minimum wage and other regulations that increase costs for small companies on thin budgets only lead to more concentration of wealth.
The notion of "extreme capitalism" is similar to "late-state capitalism". they are buzz words that are actually describing a movement away from free markets.
The notion of "extreme capitalism" is similar to "late-state capitalism". they are buzz words that are actually describing a movement away from free markets.
Ill try to take a look into this. Not familiar with the late-state concept..
I think there are a lot of concepts that you got wrong.
The austrians got it right, the problem is lack of capitalism + fiat. that generates weird economic effects and perverse incentives.
Wealth """concentration""" isn't a thing to be concerned only for those who are envious. Under hard money and Free Market 100% lassie faire the economy thrives, don't have such a cyclical bubles from the business cycle and capital goes with people who take better care of it. And yes, some people work harder, are more productive and thus accumulate more capital than others and it is fine.
Don't take me wrong, I'm not trying to be based or something but I honestly thing there is a lot of your point of view that is based in a lack of understanding of what capitalism is. Though I also think there is a bit of true in going against "this" system, since a lot of fortunes were created not on the basis of providing value to society but in being close to a politician or the money printer.
As i said, im no economist. I leave Economic definitions to the Chief Finacial Officer who i often figth with over decisions.
Im a chemist, that happen to read some papers on extreme capitalism.
Im not defining nothing here.
I believe by professional experience that we live in some sort of extreme capitalism that is leading to the disappearence of commercial margins for small companies. As distribution is not even of fair ( as you mentioned the money printer proximity) and leads to a disruption of a healthy economy.
feel free to agree or disagree, you don't need a credential, different opinions are valuable too on its own but I think you are leaning into a wrong diagnostic of the problem.
For me the money printing is one leg of the table, but also the ideas that goes in the line of "we need to make a little regulation here and there and call it a day". I think that there is a very good reason for nature to not design but yo be "humble enough to admit the limit of her knowledge and let things evolve" so to speak.
I fear unforeseen consequences, and those are the norm dealing with complex systems where all the variables are heavily coupled. That is why I think that the real problems of 100% free market are way better than the alternatives.
Top down rules are 1 size fits all, if we are lucky we all win, but if we are not, we all fail. Since is extremely unlikely than a modification in a complex system improve it (more ways to disorder it rather than to order it, like entropy) top down rules are almost a guarantee to failure IMO. Fail globally (most probable) or win globally
On the other side, on the free market with at least one who makes an improvement, everybody can copy it (I.E. a private regulation, practice, knowhow, that improves both parties) but if anyone fails, the failure is not socialized. Fail locally or win globally
you are leaning into a wrong diagnostic of the problem.
i migth,
I only speak from experience. Despite generate hundereds of millions in the last decade, im no economist. But as a business manager, i see how we are killing capitalism with several of the things we mentioned previously
im no economist, im a chemist, so probably not the best person to define capitalism..
But im also a business manager.. I see every day how we keep pushing low quality products for higher prices while we pay the least to workers. all for the sake of shareholders
Im a witness on how A LOT of companies in some industries keep tricking the agencies that are supposed to control quality and standarts.
I dont belive in a 100% free market because it would end up hosting kids, slaves, and huge scams like snake oil.. So i believe in some regulations. Some quality control. Its a scientific method for me, a formula..
We based bitcoin in math rules but then we praise markets with ZERO rules? Not sure that is the best practice..
Im a capitalist though.. Just dont believe in a free for all jungle
the "is regulations or the law of the jungle" is a naïve way to think about systems.
Having no state mandates is NOT living without rules:
rules emerge from the people trying different rules over time and keeping what works
rules are often implicit, not written down on a paper, those also can evolve from the free market
even standars used in the industry emerged on the free market like ASME standars, and without compelling anyone to buy it, so the incentives were right into providing value to society
even in literally the jungle of nature a sort of moral emerge to solve conflicts with minimal force as Jordan Peterson illustrate with his example of the lobsters fighting. Why are you so sure that humans don't develop simmilar mechanisms?
having "state mandates" also can be weponized, but you don't seem worried about that? who watches the watchers?
if you know where to see you will find a ton of examples of checks and balances being evolved in free market over time, even in the most ruthless environments like the dark web (or I should say specially there, that you have 100% freedom of association) where a sort of "know how" developed over the years about what to do and what not to do to stay safe, and is naturally enforced
Austians got it right IMO, the less you mess with the market, the better it help us to serve one another. There is no magical solutions, is not easy nor free of charge to deal with the problems properly and anyone who say the opposite is probably selling you something
PD even under monarchy people payed less taxes than today, so why should I feel less of a slave now?
You as a bitcoiner praise a hard rule mathematical bitcoin emision etc,
But you believe in no rules regarding market?
Lets not confuse rules with power and people exercicing power over you.
I believe in some rules. I belive Carbon can have 4 covalent bonds, doesnt vary. Im no statist, i hate actual government. Dont mix these two.
Is fair what you point, maybe it is an abuse of language on my side
What I support is not "the absence of rules" in the sense of "everybody will do what they want forever"
What I support is who provides the rules, I think the rules should be provided by the market. in other words, the only good rules are those who provide so much value to everybody involved that people adopt them voluntarily (whether they are aware of this or not).
I think that the market process is just a superior tool to discover what structures, rules and practices actually improves people life in the long run. Is hard to notice because good design is invisible, we tend to notice more the thing that doesn't work that those that does.
Design is always sub optimal since we cannot take everything into account, and end up with a design that "sort of works" but sweeps under the rug the consequences.
Where all the shitcoins fit in what you just said? Arent the shitcoins we attack all the time a result of free market placing its rules?
I think its a good example.
Crypto is not very regulated,
The outcome is 99% of shitcoins are scams and we left to believe in the one where rules cant be tampered..
We have generations of plebs conditioned to believe that the state has their best interest at heart. The common man has not learned to be skeptical. If you were to remove all regulations on drugs for example you'd see a rash of problems. But over time people would learn and we'd all be better off.
This is what I believe is going on with "crypto". The public is naive and gullible. Even within the regulated markets people get scammed so regulation really doesn't protect people from it.
Bitcoiners are just people like any others. We all have opinions. Just like your family probably has diverse opinions on what food is best to eat, we all think we are right. It is the free market of ideas. The same is true with bitcoin in relation to crypto.
Language is an anarchy. While there are written definitions that help, people have their own internal definitions and some use free-market and capitalism differently. In any discussion if you define what you mean by a term then we can possibly avoid talking past each other.
You didn't ask for a lecture so I won't give one. I'll just say I completely disagree with you on "100% free markets" leading to what you describe. I also do not think we have extreme capitalism. Extreme capitalism would basically be a completely free market which we do not have. Every business is highly regulated and taxed. And as you stated the agencies that are supposed to "keep them in check" are captured or tricked into playing their game. Now I don't think this is true of the small cap companies. That's one reason they are suffering and the large companies are suffering less. The centralization of control (regulation) creates incentives to capture those running the reg agencies. So in fact if you make more regulation you just increase the incentive for corruption. So less extreme capitalism would not look all that different.
I don't think there is a simple answer to why all these small companies are unprofitable but the beset one I've heard is that we are in a recession that is a consequence of cheap money monetary policies on top of the consequences of a global shutdown of trade by governments in response to the pandemic. Companies have over extended themselves because the credit markets are rigged by the central planners (FED). So the natural signals that would occur from lenders are gone.
The other factor is that due to the debasement of the fiat currencies and the governments push to get everyone into the stock market as a savings vehicle the stock market drives many businesses. They are being driven by very short sighted (high time preference) 3 month targets instead of longer term health for their businesses. We are all affected by the melting ice cube of the fiat money our economy runs on.
Indeed the word extreme is relative and used by some economists only. Its not a coined concept. Some call it a different word and there is no consensus.
What i mean by extreme, is the way we push the shareholder benefit every single year against the product and the worker.
the way we maximize profits and then recurr to scam practices makes the market price artificially low and then that translates for lesser margins. I agree the FIAT itself is a cornerstone of the problem itself. As money debasses the need for profit is higher.
We definitly are in a recession but the zombie companies are there for ages, not related to this current recession.
I cant see how no regulations can help.. We saw history full of exploitation and slave work. We regulated that, it got better for a while.
I sometimes i have trouble understanding how people love sound money ruled to the mathematical precision, but then dont belive in market rules. Dont you trhink thats antagonistic?
Having no state mandates is NOT living without rules: