If you wonder why the stock market shoots up and down, when the underlying economy and company results change only slowly, the answer is because it is a casino.
The people who manage the large investment funds are actually professional gamblers. Their actions overshadow and also undermine individual shareholders, who are actual investors – they typically hold for the long-term.
In a normal casino, say at a roulette table, you win or lose by picking the correct number (or colour: red or black). In the investment casino, though, you win or lose based on your timing – not what you choose but when you choose. If you buy before a lot of other people buy, or sell before a lot of other people sell, you win. If it’s the reverse, you lose.
This means that it is much more important in this casino not to understand how companies or the overall economy are doing, but to be able to predict when the pack is going to move. Individual investors support the economy.
They provide the money that is used by companies for capital investments and growth. Professional gamblers often sabotage the economy, by causing wild gyrations that sap everyone’s confidence.
The worst thing of all is that these professional gamblers add nothing of value, yet when they guess right they are the most well-compensated people in the world. They don’t produce anything. They just shuffle pieces of paper and computer files. The ones who are the best at it are billionaires.
Why is it this way? Why would our society choose to enshrine such people as modern-day kings? The answer is that – in democracies at least – we elect leaders. We don’t make the decisions of government ourselves.
Candidates for election also have to run expensive campaigns, so they need money, which the gamblers are happy to provide – as bribes. “Do what you want on other issues, but don’t mess with our casino.” The officials, when they retire, also then regularly join the gambler class, which plan they in many cases had even before they sought office. Being in government and having political power was not their ultimate goal. The real payoff comes when they join Wall Street.
Were it not for this system, elections would be publicly funded and the gamblers would be taxed at 95 per cent.
If and when people finally wake up and choose officials who are not corrupt, election funding can be changed to public-only and the investment casino system can be destroyed. The benefits to society will be as great as when the people in the remaining political dictatorships overthrow their rulers. We need both steps for the world to work well: the end of political dictatorship and the end of investment casino capitalism.