Forum Post: Speculation

How does speculation parasitize the economy? It makes money without contributing to real production. It will increase the cost and price of products or real estate. It will not increase the quality or quantity or anything.

The excerpts that follow [from the article linked below] describes the problem. Among the possible solutions offered include a transaction tax to kill the heinously parasitic quants. Wealth taxes and a capital gains schedule that decreases the tax with the length of time an investment is held are also mentioned. Something must be done to stem the concentration of wealth that leaves most of us broke and in debt.

excerpts from Tim O'Reilly's Naked Capitalism article:

"Why do we treat purely financial investments as equivalent to real business investment? 'Only around 15% of the money flowing from financial institutions actually makes its way into business investment,' says Rana Foroohar. 'The rest gets moved around a closed financial loop, via the buying and selling of existing assets, like real estate, stocks, and bonds.' There is some need for liquidity in the system, but 85%? As we'll see in the next chapter, this great money river is accessible only to a small part of our population, and relentlessly directs capital away from the real economy."

"John Maynard Keynes recognized this problem eighty years ago during the depths of the Great Depression that followed the speculative excesses of the 1920s, writing in his General Theory of Employment, Interest, and Money: 'Speculators may do no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes the bubble on a whirlpool of speculation. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.'"

https://www.nakedcapitalism.com/2017/10/tim-oreilly-time-rewrite-rules-economy.html