Wednesday, October 08, 2008

Wall Street-Las Vegas Gambling Casinos

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Back in the bad old days if an investor thought that a company had a good potential for future earnings and maybe even some growth, they bought a piece of the company. They purchased some common stock.

This was old time economics.

In these boom-bust times shares are now traded by computers, and an investor might buy and then resell stock in the same company within hours. It has become nothing more than largely unregulated gambling. Betting that the value of the stock/currency/commodity will go up or down. And worse than that - using borrowed money to do the gambling with.

A simple solution would be to apply a sales tax anytime stock in a company is purchased. Say a national sales tax of 7%. Then, just like in certificates of deposit, if one sold the stock too quickly, say within the first 12 months after buying it, one would have to pay a penalty. Just to pull a number out of the air (kind of like Hank Paulson did with the $700- billion), say a 10% penalty.

We should eliminate outright gambling in the financial markets. Financial instruments which gamble or bet that they value of a stock will go up or down should be prohibited. And anyone who markets insurance in any form should be required to have adequate reserves to pay off the potential claims too.

These concepts would certainly moderate the irrational swings in the markets and the Las Vegas boom-and-bust mentality.
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