After Gamestonk will hedge funds now threaten U.S. solvency itself?

Avnger

Trash Goblin
Legacy
Apr 10, 2020
1,505
620
118
Country
United States
With Biden creating another thousands of billions of dollars of debt they expect inflation and interest rates to increase.
How does sovereign debt affect inflation and/or interest rates? I get the feeling you don't really understand monetary or fiscal policy and how they interact with the economy at large.

edit: Just to be clear, not understanding said policies isn't a slight. They're complex as fuck and I personally only really understand the basics.
 
Last edited:
  • Like
Reactions: CaitSeith

Silvanus

Elite Member
Legacy
Apr 26, 2020
5,802
1,489
118
Country
United Kingdom
Seanchaidh is doing the communist thing and suggesting the wealth of owners of corporations is effectively stolen wealth, generated by other people.
The output (and therefore the wealth) of any company is a product of every employee to some extent: those who actually design/ create/ put together the product or deliver the service, as well as admin staff, marketers, managers, etc etc. The company then remunerates its employees in wages.

But anybody with eyes can see that the remuneration is very rarely proportionate to the amount of work put in. Those most directly responsible for delivering the service or create the product will usually be paid a tiny fraction of the wage of a managerial member of staff. Sure, okay, maybe a managerial member of staff does work harder (sometimes)... but 10 times harder? 20 times? 100 times? That's the kind of wage discrepancy we're talking about. And, sometimes, the owner won't be involved in what the company actually does at all.

So then we have a situation where a product or service generates revenue, and then the majority of remuneration for that goes to people who were entirely uninvolved in the process of creating the product or service.

It's not literally "theft", sure, whatever. But it's grossly inequitable distribution.


It's usually a dumb enough argument in the general sense, but it's extra dumb here when we are talking about capital gains rather than corporate profits. The wages of the workers and the money made selling stock don't pull from the same pool of money. Those things aren't in competition with one another.
This is just a small step of separation. The value of capital gains is determined by the output of the company... which is determined by the effort of the employees. It's immaterial.
 
Last edited:

Agema

You have no authority here, Jackie Weaver
Legacy
Apr 3, 2020
6,207
3,293
118
So then we have a situation where a product or service generates revenue, and then the majority of remuneration for that goes to people who were entirely uninvolved in the process of creating the product or service.
Technically not. The average profit margin for a company is about 5-10% revenues. However, companies tend to have salary costs in the region of a third to two-thirds revenues. Thus, in terms of absolute cost, workers are receiving a great deal more remuneration than shareholders; it is of course vastly less remuneration per person for workers.

Secondly, "the process of creating the product or service" also includes the investment funding to initiate and develop the product or service. Without that, there is nothing. There is also (if not always as much as it should be) a risk attached. Workers substantially do not lose their pay, except perhaps a bit right at the end, and their pensions. Investors can lose pretty much everything, because although via dividends they can earn "income", there is usually much more value in the stocks themselves. Thus there is a clear rationale for investors to receive money, and I don't think that should be ignored as if they don't provide a value added on top of labour. They are integral to much labour even occurring in the first place.

There is, of course, a question to be asked about the entire set-up from start to finish - is the whole system really appropriate or sufficiently equitable. Is the current system of corporate ownership fundamentally problematic with lack of worker representation and profits? Do we have the wrong balance of worker salaries to shareholder returns for the wider benefit of society? Or do we just need to redistribute the crap out of these gross imbalances with taxation?
 
  • Like
Reactions: stroopwafel

Silvanus

Elite Member
Legacy
Apr 26, 2020
5,802
1,489
118
Country
United Kingdom
Technically not. The average profit margin for a company is about 5-10% revenues. However, companies tend to have salary costs in the region of a third to two-thirds revenues. Thus, in terms of absolute cost, workers are receiving a great deal more remuneration than shareholders; it is of course vastly less remuneration per person for workers.
That "per person" bit constitutes a massive difference, though. The number of shareholders is minuscule in comparison with the number of employees. Each of them will make far more than anyone who actually made the product or provided the service.

Secondly, "the process of creating the product or service" also includes the investment funding to initiate and develop the product or service. Without that, there is nothing. There is also (if not always as much as it should be) a risk attached. Workers substantially do not lose their pay, except perhaps a bit right at the end, and their pensions. Investors can lose pretty much everything, because although via dividends they can earn "income", there is usually much more value in the stocks themselves. Thus there is a clear rationale for investors to receive money, and I don't think that should be ignored as if they don't provide a value added on top of labour. They are integral to much labour even occurring in the first place.
Workers absolutely do lose their pay and pensions. When a large company begins underperforming against expectations, management will tend to impose redundancies, slash pay, or devalue pension contributions to make up the shortfall. I personally know quite a few people who've lost their jobs as a result of the loss of revenue associated with Covid. The employer contributions to my own pension have been lowered. These measures will be put in place expressly to avoid losses for shareholders.

There is also quite a discrepancy in how vital that money is to the individual. The shareholder may lose all they put into a venture, okay; but investment tends to come from superfluous income in the first place. They lose that investment, they'll still have their regular income, and are likely to be sitting on quite a pot of money if they're major shareholders in the first place. Whereas an employee loses their pay, and they can't make rent or buy groceries.

There's plenty of rationale for investors to receive dividends. It's the sheer imbalance I'm condemning; a fair wage for the worker is sacrificed to maximise that dividend far beyond what was ever put up in the first place.
 

Eacaraxe

Elite Member
Legacy
May 28, 2020
883
747
98
Country
United States
"Will Wall Street douchebags intentionally firebomb the US economy?"

Like the last the last three times they did it in the past 40 years? Y'know, when they had to deal with the weighty, long-lasting, consequences of bailouts, no prosecutions, and further deregulation, all while the stupidest, most propagandized, people on the face of the planet (the US electorate) decided to eat each other despite knowing damn well what the cause was and who caused it?

Oh yeah, I'm sure they learned their lesson.
 

TheMysteriousGX

Elite Member
Legacy
Apr 12, 2020
3,319
1,069
118
Country
United States
Communists appear to be the only people with basic numeracy.
I'm honestly convinced that communists, or at least the vaguely economic left wing people that get grouped into the label, are the only people who study capitalism at this point. Adam Smith, dude who codified the whole concept in Wealth of Nations, knew exactly who created the value in a company.
A machine with no labor generates no wealth, regardless how expensive the capital investment.
 

stroopwafel

Elite Member
Apr 29, 2020
2,965
324
88
Which means...
Investors already making money due to bonds losing value(ie hedge funds shorting them).

How does sovereign debt affect inflation and/or interest rates? I get the feeling you don't really understand monetary or fiscal policy and how they interact with the economy at large.

edit: Just to be clear, not understanding said policies isn't a slight. They're complex as fuck and I personally only really understand the basics.
Well yeah, I'm just a casual observer not some wall street banker or something. All I know is that debt(espescially astronomical debt like the U.S. deficit) is only manageable when you can keep the costs low. Without that you get the inevatible inflation and increase in interest rates. That is why the federal reserve suppress the interest rates, so the government can borrow more money. The hedge funds make that more expensive. It's really not that difficult.
 

tstorm823

Elite Member
Legacy
Apr 24, 2020
3,119
433
88
Country
USA
Communists appear to be the only people with basic numeracy.
Your attempt to make economics "basic" is the problem. Wealth is both created and destroyed. It is a fiction. You can't write it as basic arithmetic and find conclusions that even make sense. Like, I'll give you the laziest counterpoint in the world: you say that if someone makes a company and hires people and the value of the company goes up, the owner took that value from the workers. What if the value of the company goes down? What if the owner loses money? Did the workers steal that value? Did somebody steal that value? Or is your "basic numeracy" basically nonsense?
 

Silvanus

Elite Member
Legacy
Apr 26, 2020
5,802
1,489
118
Country
United Kingdom
Like, I'll give you the laziest counterpoint in the world: you say that if someone makes a company and hires people and the value of the company goes up, the owner took that value from the workers. What if the value of the company goes down? What if the owner loses money? Did the workers steal that value? Did somebody steal that value? Or is your "basic numeracy" basically nonsense?
So, in this scenario, why has the "value" gone down? Is it as a result of the employee's work, or is it independent, entirely unconnected (a result of external market factors maybe)?

If the former, then how exactly has that happened? Is it because they're a member of staff who isn't directly responsible for production, like an administrator, HR, or sanitation? If so, the employer has made a decision that their presence assists the functioning of the company long-term. The employer has made that cost-benefit decision.

Or is it because the employee's work is of such little value that they don't cover their own wage? How often does that happen? It's a hell of a lot less common than the other way around... and even when it does happen, the employer is the one who has fucked up recruitment. They still made that decision.

And if the devaluation is entirely unconnected, then you don't have a valid point whatsoever. The employee still creates value; the money made from that increased value is still primarily taken by other people. If the employee weren't there, then the value would be lower still, and the discrepancy between the two figures is a positive contribution on the part of the employee.

You've criticised someone else for boiling economics down to "basics", but this is surface-level misunderstanding of economics right here.
 

tstorm823

Elite Member
Legacy
Apr 24, 2020
3,119
433
88
Country
USA
And if the devaluation is entirely unconnected, then you don't have a valid point whatsoever.

You've criticised someone else for boiling economics down to "basics", but this is surface-level misunderstanding of economics right here.
Ok, but you're refuting senchaidh right now. I agree, if the devaluation is entirely unconnected, it's wrong to draw a connection between the workers' wages and the value of the company. The same is true in reverse, if the company increases in value, it can be entirely unconnected to the labor. It's not that I don't have a valid point. You're making my valid point.

Seanchaidh has a surface-level misunderstanding of economics.
 

Silvanus

Elite Member
Legacy
Apr 26, 2020
5,802
1,489
118
Country
United Kingdom
Ok, but you're refuting senchaidh right now. I agree, if the devaluation is entirely unconnected, it's wrong to draw a connection between the workers' wages and the value of the company. The same is true in reverse, if the company increases in value, it can be entirely unconnected to the labor. It's not that I don't have a valid point. You're making my valid point.
No, I'm not. In either scenario (an unconnected increase or an unconnected decrease), the employee still creates value, and is not remunerated proportionately to that value. That's the premise of the point and remains unaffected.

The argument isn't just to remunerate employees more or less if the company does better or worse. That's a separate conversation, which doesn't relate to the internal inequity of wage distribution between different beneficiaries of the same company's revenue. The argument is to remunerate employees at a rate more commensurate with their contribution. These are not interchangeable concepts, and the latter is principally unaffected by the company doing well or poorly.
 
Last edited:

tstorm823

Elite Member
Legacy
Apr 24, 2020
3,119
433
88
Country
USA
The argument isn't just to remunerate employees more or less if the company does better or worse. The argument is to remunerate employees at a rate more commensurate with their contribution.
But seanchaidh statement inherently implies these are the same thing. To say ownership value rising is theft, you have to draw an equivalency between the company doing better and a worker's contribution. You don't want to do that, you know those things aren't the same. I don't want to do that, I know those things aren't the same. The communist thinks those things are the same. Does it really hurt you that bad to side with a Republican instead of a communist?
 

Silvanus

Elite Member
Legacy
Apr 26, 2020
5,802
1,489
118
Country
United Kingdom
But seanchaidh statement inherently implies these are the same thing. To say ownership value rising is theft, you have to draw an equivalency between the company doing better and a worker's contribution. You don't want to do that, you know those things aren't the same. I don't want to do that, I know those things aren't the same. The communist thinks those things are the same.
I'm not seeing that. I think you're unintentionally confusing an issue of principle with a matter of scale.

For argument's sake, let's imagine a hypothetical company in which a lower-level employee on the production floor earns 10, and their manager earns 100. I do not believe that the manager puts in 10x as much work as each individual employee (and nor do I believe that their input is 10x as responsible for the company's performance), so I'm objecting to the principle that their wage should be 10x higher.

Shift a year later, and the company is performing very well, selling lots of what-have-yous. Their revenue has doubled. Now, if wages rose in line with that performance, we end up with the employee earning 20, and the manager earning 200.

The gap between them was 90 last year; now it's 180. Seanchaidh's contention is that since the growth of the company relied on the company's output, which he believes is more down to the employee than the manager, then the increase in the scale of that differential represents a larger "theft".

But it is only the scale that has shifted. The principle which underpins the objection-- that the manager should not be paid 10x more than the employee-- is unchanged. That is the core of the issue. Scale has magnified it; resulted in a larger numerical discrepancy. That's all. The principle is the same.

@Seanchaidh, feel free to correct me if I'm misrepresenting you.

Does it really hurt you that bad to side with a Republican instead of a communist?
I'm not a communist, but I am a socialist. I believe I have more in common politically with him than I do with you.
 

tstorm823

Elite Member
Legacy
Apr 24, 2020
3,119
433
88
Country
USA
I'm not seeing that. I think you're unintentionally confusing an issue of principle with a matter of scale.
...
I'm not a communist, but I am a socialist. I believe I have more in common politically with him than I do with you.
For the most part, I'm going to let your post sit uncontested until our third party chimes back in, but I would suggest to you that you do have more in common with me, because you can say things like "it's not an issue of principle but a matter of scale".
 

crimson5pheonix

It took 6 months to read my title.
Legacy
Apr 3, 2020
34,697
1,314
118
Your attempt to make economics "basic" is the problem. Wealth is both created and destroyed. It is a fiction. You can't write it as basic arithmetic and find conclusions that even make sense. Like, I'll give you the laziest counterpoint in the world: you say that if someone makes a company and hires people and the value of the company goes up, the owner took that value from the workers. What if the value of the company goes down? What if the owner loses money? Did the workers steal that value? Did somebody steal that value? Or is your "basic numeracy" basically nonsense?
Wealth isn't frequently destroyed, it does however shift. Why did the value of a company go down? Presumably the company is paying more money than it's making. If you look at it on a spreadsheet the liquid assets of a company fluctuate with outlays and revenue. So just saying "Value go down" is reductionist and simplistic.

We can see plainly that in any scenario any increase in the value of a company is either going to come from the receipts collected by the worker's efforts. But a company can lose value in a number of ways, but that value isn't destroyed, it's shifted. That's why the numeracy is basic, and why Sean said apparently only communists apparently understand basic numeracy.
 

tstorm823

Elite Member
Legacy
Apr 24, 2020
3,119
433
88
Country
USA
Wealth isn't frequently destroyed, it does however shift. Why did the value of a company go down? Presumably the company is paying more money than it's making. If you look at it on a spreadsheet the liquid assets of a company fluctuate with outlays and revenue. So just saying "Value go down" is reductionist and simplistic.

We can see plainly that in any scenario any increase in the value of a company is either going to come from the receipts collected by the worker's efforts. But a company can lose value in a number of ways, but that value isn't destroyed, it's shifted. That's why the numeracy is basic, and why Sean said apparently only communists apparently understand basic numeracy.
Wealth is constantly destroyed. Nearly every car on the road depreciates every time it's driven. Obsolete technology loses value even if it's untouched in a vacuum seal. The values of stocks rise and fall literally at the whims of reddit with no real meaning at all behind why.

Do you really believe that the value of Gamestop right now, based on market cap, is derived from an increase in the workers' efforts?