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Indexation Is A Socialist Way Of Allocating Capital

Tyler Durden's picture




 

Authored by Charles Gave of Evergreen Gavekal,

The role of financial markets is to evaluate in real time the marginal return on capital of different assets. This is done through a ‘price discovery mechanism’, with the ‘right price’ found out through a system of constant trial and error. To discover this price calls for a community of active money managers, each doing his or her due diligence before buying and selling. This price is a function of the return on capital and of the expected growth rate of this return. It has nothing at all to do with the size of the investment under consideration. What’s more, if the price of an asset has been going down for the ‘wrong’ reasons, then active money managers should buy more of it. Over time this process will help to stabilize the system.

Active money management is essentially a ‘mean reversion’ strategy. That’s not so for indexation. In the indexation process, there is no attempt at price discovery. The only thing that matters is the relative size of the asset: the bigger the market capitalization, the more an investor should own. This means if the price of a large asset goes up more than the market as a whole, indexers have to buy even more of it.

Thus indexation is a momentum-based strategy. Worse, it is a form of socialism, since new money is allocated not according to the expected return on capital but rather according to the current price of an asset relative to other assets. The bigger an asset, the more one should own…

In a true capitalist system, the rule is the higher the price, the lower the demand. With indexation, the higher the price, the higher the demand. This is insane.

Where it becomes really ridiculous is in the bond markets. Over time, the government bond market of a very badly managed country (like France) will become much bigger than the bond market of a well managed country (like Sweden). As a result, over time indexers have to buy more French bonds than Swedish bonds. The bond vigilantes of yesteryear are now condoning the very crimes they once condemned… and they have no choice about it.

Any economic system based on momentum must be extremely unstable, moving relentlessly from boom to bust and back again, which over time will cause a massive waste of capital. The swings will only be reinforced by zero interest rate policies, since these suppress the cost of capital against which returns on capital should be measured.

The deep thinkers on the New York Times bestseller list all wonder why our economies are moving ex-growth. May I offer a simple explanation?

We cannot have economic growth without a proper cost of capital, nor if capital is allocated, not according to the marginal growth rate of the return on invested capital, but according to the market capitalization of the existing capital stock. What matters is the expected changes in the ROIC and not the current value which the market puts on that return.

Indexation could work if it remained a satellite strategy, with say 10% of the money being managed through indexation, the rest being managed by active money managers. As such, it would be a parasitic strategy. Indexers would benefit from the price discovery work done by others without paying the costs associated with the process.

But a system where everybody wants to be a freeloader cannot work. The real problem here is that investment ‘consultants’ (read failed money managers) have defined risk as a deviation from the index against which the money manager is benchmarked.

This is idiotic. It forces even mean reversion managers to become closet indexers.

Let me be clear: in a properly managed capitalist economy there should only be three returns - in real terms - to worry about:

1) 1%—if one buys 3 month T-bills and does not want to take a duration risk
2) 3%—if one buys long government bonds and is willing to take a duration risk
3) 6%—if one buys shares and accepts the risk one may not get all of one’s money back

Over the long term, equity managers should be measured against the 6% real target. All other benchmarks will lead to the misallocation of capital and create a deeply unstable financial system together with a much lower growth rate and higher unemployment.

In effect, by pursuing indexation we have introduced a socialist way of allocating capital in the heart of the capitalist system.

As we all know, socialism is the ultimate form of freeloading. It has never worked, and it never will. This indexation is one of the most obvious forms of parasitism I have ever encountered.

 

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Sat, 07/26/2014 - 17:34 | 5007999 Hobbleknee
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The heart of what capitalist system? I wasn't aware that capitalism existed anywhere on earth.

Sat, 07/26/2014 - 17:45 | 5008021 Pladizow
Pladizow's picture

Was this authored by a money manager - any bias or self interest here?

What percentage of money mangers beat their bench mark?

Fuck em all - starve the beast!

Sat, 07/26/2014 - 18:37 | 5008141 knukles
knukles's picture

Huh?
Whadda bunch crap for an individual investor who probably (as in 100% probability) does not have the expertise to seek and find significant alpha other than harebrained schemes.

Point #2 .  The vast majority of managers significantly under-perform (as in dollars in dollars out, simple concept) their benchmarks for 2 reasons.
1.) management fees
2.) transactions costs (brokerage bid/ask and fees)

Measuring those two things, most people wind up some 2% behind the index before they blink (As in Malcom Gladwell)

Jesus, people.....

 

Sat, 07/26/2014 - 19:28 | 5008272 Escrava Isaura
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The title "A Socialist Way of Allocating Capital"

Should Read: “I Need Some Capital to Buy a Dictionary”

Sat, 07/26/2014 - 21:57 | 5008570 Democratic koolaid
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Math and socialism seem mixed up within this article, alot of mumbojumbo.

Sat, 07/26/2014 - 23:22 | 5008773 Escrava Isaura
Escrava Isaura's picture

Unscramble it is the fun part….

Welcome to democracy 101!

 

Sun, 07/27/2014 - 11:48 | 5009634 steve2241
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Ya pays ya money and ya takes ya chances. 

Sun, 07/27/2014 - 05:29 | 5009153 Urban Redneck
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It was authored by a money manager, who (suspiciously) only looked at the bull case, and ignored the bear case, in making an analogy to socialism.

The bear case is actually more damning, because good companies that have created value see that value destroyed and endure higher borrowing costs as collective punishment due to the group think and herd mentality of lazy money managers who can't be bothered to discriminate between good and bad companies to invest in.

An obvious example would be every time dumb money flows out the made-up and very heterogeneous asset class called "Emerging Markets."

Sat, 07/26/2014 - 17:44 | 5008027 Skateboarder
Skateboarder's picture

It does, but only select people are allowed to be 'capitalist.' You or I, for example, would go to jail lol.

Sat, 07/26/2014 - 17:42 | 5008024 Death and Gravity
Death and Gravity's picture

So fucking tired of Amurrcans decrying anything they dislike as "Socialism".

Sat, 07/26/2014 - 17:46 | 5008036 Skateboarder
Skateboarder's picture

The memes are engrained so far deep that it's damn near impossible to scrub it off.

Sat, 07/26/2014 - 18:31 | 5008124 flacon
flacon's picture

I find that Americans often blame "capitalism" - even calling it "crony capitalism". By contrast I haven't heard people use the term "crony socialism" very often. 

Sat, 07/26/2014 - 19:20 | 5008258 Escrava Isaura
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“America’s elites know that capitalism is totally unworkable. We try to impose it in the 3rd world so we can destroy them”

Noam Chomsky

Sat, 07/26/2014 - 21:32 | 5008526 Anusocracy
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I don't know what capitalism is or how it works. Therefore, I'll try and impose socialism on the entire world so as to destroy all economies equally.

Noam Chomskytard

Sat, 07/26/2014 - 23:34 | 5008791 Escrava Isaura
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Anusocracy,

Chomsky is more of an anarcho-syndicalist.

It means: Direct action (action undertaken without the intervention of third parties such as politicians, bureaucrats and arbitrators) and direct democracy, or workers' self-management.

Sun, 07/27/2014 - 00:15 | 5008865 Burnbright
Burnbright's picture

No, Noam Chomsky is just a plain vanilla moron. 

 

What kind of idiot gets to be as old as he is and not realize the contradiction of his logic? He wants to use government to solve social problems when he recognizes that a majority of social problems are in fact created by the government. If only Noam was in charge! He would get it right! /eye roll

Sun, 07/27/2014 - 09:20 | 5009382 Escrava Isaura
Escrava Isaura's picture

Burnbright,

It's obvious that you bought into the propaganda of misinformation.

Anyway, the problems humanity faces are of our own making. That's the problems with mammals; they always think they are clever in find solutions.

That’s why all mammals goes extinct every 100 thousand years or so. And we humans are right at this point.

Sun, 07/27/2014 - 09:34 | 5009402 Bendromeda Strain
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I almost feel sorry for you dear. Your existence is shrouded in a darkness of your own making. Chomsky won't be able to help... ever.

Sun, 07/27/2014 - 09:44 | 5009421 Escrava Isaura
Escrava Isaura's picture

Bendromeda Strain,

Do you have a reading comprehension?

Sun, 07/27/2014 - 13:15 | 5009841 sessinpo
sessinpo's picture

 

Escrava Isaura  Anyway, the problems humanity faces are of our own making. That's the problems with mammals; they always think they are clever in find solutions.

That’s why all mammals goes extinct every 100 thousand years or so. And we humans are right at this point.

-----

Bendromeda Strain    almost feel sorry for you dear. Your existence is shrouded in a darkness of your own making. Chomsky won't be able to help... ever.

----   

Escrava Isaura     Do you have a reading comprehension?

-----

My comment. It would appear that you, Escrava Isaura, hase the problem. By your own posts, you admit that you face extinction. That is not reading comprehension failure by Bendromeda. That is total logic failure by you Escrava.


Sun, 07/27/2014 - 15:40 | 5010242 Escrava Isaura
Escrava Isaura's picture

sessinpo,

Burnbright said: "social problems are in fact created by the government.

Then, I said: the problems humanity faces are of our own making. (I should have stopped here, so not to confuse the forum). My point: Our social problems are bigger than our governments, because these problems were created by all of us.

Bendromeda Strain then said: “almost feel sorry for you dear. Your existence is shrouded in a darkness of your own making. Chomsky won't be able to help... ever.

My response: "Do you have a reading comprehension?" and it was a poor choice of words, so accept my apologies.

I should have written: “Of course Chomsky would not be able to help, because the issues we will be facing are huge. Catastrophic, in my opinion. The coming financial and energy crisis will be better dealt within your own community.”

sessinpo, I did say that “mammals think that they are clever in find solutions… That’s why all mammals go extinct” and let me explain it in the proper form: I hear lots of solutions been presented here, at Zero Hedge forums. However, many of these solutions will make the problem worse.

I read lots of clichés that distract many of us in find the Aha Aha moment. And that’s too bad. So instead, focus in your community. Start getting to know your neighbors. Start talking to your friends. Organizing.

Those will be proven as the best solutions, because our generation is not going extinct.

However, not sure the next 2/3 generations… Or in case of a nuclear conflict.

Hope that clarifies.

Sun, 07/27/2014 - 16:33 | 5010376 Anusocracy
Anusocracy's picture

"However, many of these solutions will make the problem worse."

Should have started with "I believe".

Which is my point: everyone live by their own beliefs and leave all others to their own beliefs. Some beliefs "will be proven as the best solutions".

Unfortunately, too many fools think they are gods.

Sun, 07/27/2014 - 19:57 | 5010955 Twodogs
Twodogs's picture

Those who disagree with you are "misinformed" lol. Your philosophy on mammals was about as insightful as a fence post.

Sun, 07/27/2014 - 15:21 | 5010164 Anusocracy
Anusocracy's picture

That he is, and if you are too, I wish for you to live in an anarcho-syndicalist society, while I live in an anarchist society, with both societies having no authority over each over. It's called panarchism.

People have to leave the social structures of the animal world behind and move towards social structures of a human world, structures based on non-aggression, property rights, and voluntary interaction.

Sun, 07/27/2014 - 20:02 | 5010977 Twodogs
Twodogs's picture

Deep.

Sun, 07/27/2014 - 10:15 | 5009485 Greenskeeper_Carl
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that guy, and this isuara person, seem very ignorant of history. Governements cause problems, not fix them. Remember that time everything sucked and then the govt came in and fixed it and everything was awesome? me neither, cuz its never happened. ever.

Sun, 07/27/2014 - 00:25 | 5008891 puckchaser
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Cronyism is implied in socialism. 

Sun, 07/27/2014 - 10:52 | 5009518 Escrava Isaura
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NO, IT IS NOT.

Cronyism is a byproduct of State Capitalism.

Sun, 07/27/2014 - 12:50 | 5009792 Attitude_Check
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In the real-world of Socialism - history says otherwise.  Ask any former citizen of the USSR or Warsaw pact country about cronyism.  Read Belenko in Mig Pilot.

Of course cronyism is definitional in Fascism.  Any time a governmental system is created where a select few have all the power to govern (kingdoms, Dictatorships, Fascism, Socialism), human nature results in cronyism corruption, as the leaders help thier friends.

A decentralized system is what is needed to minimize cronyism, either in government or economics.

Sun, 07/27/2014 - 15:42 | 5010247 Escrava Isaura
Escrava Isaura's picture

Attitude_Check You said: “A decentralized system is what is needed” 

How can you have a decentralized system? Systems are inherited corrupted and damaging.  

How about that: How about having the local population create their own system, say their own cooperatives?

You said: USSR and Socialism.

Attitude, you’re obvious an smart person and I need you to ask yourself this question: By the way, you won’t need to look anywhere for the answer. I will come automatically:

Here’s the question: Do you ever wonder why the US and USSR labeled the USSR as Socialist? In the peak of the Cold-War, how could they have both agreed on something?

Think?

 

Sun, 07/27/2014 - 20:06 | 5010987 Twodogs
Twodogs's picture

Anything that is implemented by force is by definition UNcooperative. How could you miss that?

Sun, 07/27/2014 - 13:33 | 5009880 sessinpo
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Escrava Isaura   NO, IT IS NOT.

Cronyism is a byproduct of State Capitalism.

----

Once again, total logic failure by Escrava. Here is why.

Cronyism is a failure of morality of ANY system. You can have cronyism in any economic system. The question here is how and what system do you have that most quickly addresses such moral failures.

And that becomes difficult because one cannot legislate morality. Thus, after centuries, the answer isn't found yet.

 

 

Sun, 07/27/2014 - 16:07 | 5010316 Escrava Isaura
Escrava Isaura's picture

 

 

Sessinpo,

Which economic system has any moral?

Let me go further: Which 'system' of government, religion, or institutions have any moral?

cro·ny·ism: By Merriam Webster Dictionary: noun: The unfair practice by a powerful person (such as a politician) of giving jobs and other favors to friends.

Sessinpo, You said: “because one cannot legislate morality. Thus, after centuries, the (cronyism) answer isn't found yet.”

Wrong! Just ask the people that got nominated as ambassadors.

Two things that don’t go together: Water and Oil. And Humanity and Morality…. I am not so sure about the water and oil.

Sun, 07/27/2014 - 20:13 | 5011009 Twodogs
Twodogs's picture

Well said. Cronyism is the enemy of wealth. It is defined as agreements involving rule changes or discretionary enforcement of such.

Transactional agreements between parties within the rules are not immoral and not wealth destroying, the opposite of cronyism.

Sun, 07/27/2014 - 11:41 | 5009606 Weisshaupt
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You don't hear of "Crony Socialism" because cronies are implicit in how the system will be run.  A central Government  Authority confiscates the labor of more productive people  by force  and doles it out as largess to less productive people  ( the cronies)  

In Hypothetical Socialism those in power ensure "fairness" and equal outcomes for all and the govt attempts to care for every citizen as a Shepard would care of his herd. ( Because what is more fair than doing 100% of the work and risk in producing something and getting to keep 10%  as a bunch of other people who contributed litte get thier fair share?)

 

However, real world socialism invariably fails- due to human nature and how power corrupts.  The  largess collects for the "good of the worker"  is invariably doled out disproportionately to those in power, and those who help keep them in power.  The Pigs ALWAYS move into the farmhouse, and political influence, rather than merit, is what advances one in the society. 

The potential for such corruption is greatly reduced in a  properly functioning Capitalist system with free markets , real price discovery and a limited government that lacks the power to interfere with the markets and individual transactions of individuals.  Its not that real world capitalism will be free of  corruption and fraud  - but the opportunities to centralize power is greatly reduced and  therefore so are the opportunities for theft and graft enabled by the violence of the State . It is only when the State is given such power while still maintaining the illusion of free markets that it becomes "crony capitalism" 

 

Sat, 07/26/2014 - 19:57 | 5008319 profchaos
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I hope we can all agree that index funds are not a feature of socialism.

It seems like the natural evolution of private capital markets is away from picking winners within sectors and toward index funds that capture broader market trends. The faith in active asset management erodes and markets settle down into passive herds driven by momentum and the understanding that the large majority of investors will ride the market up and down together. This is a degenerate mode of capitalism that happens when investors become very far removed from the underlying businesses and won't even pretend to know enough to make informed decisions. I'm just trying to protect my savings. Surely there is someone closer to the boots on the ground who should be judging the merits of particular businesses. Like a commercial bank or something.

There are market economic models in which capital is allocated exclusively via credit unions and/or commercial banks (i.e no stock markets). There are several names for these models but none of them are socialism.

Sat, 07/26/2014 - 22:04 | 5008588 Radical Marijuana
Radical Marijuana's picture

Indeed, Skateboarder, and that may be related to this quote from a link that JR provided below:

http://www.thirdworldtraveler.com/Fascism/Wall_Street_Rise_Hitler.html

p167 "Within the last decade or so, certainly since the 1960s, a steady flow of literature has presented a thesis that the United States is ruled by a self-perpetuating and unelected power elite. Even further, most of these books aver that this elite controls, or at the least heavily influences, all foreign and domestic policy decisions, and that no idea becomes respectable or is published in the United States without the tacit approval, or perhaps lack of disapproval, of this elitist circle."

Since the real world is controlled by lies backed by violence, the biggest bullies' bullshit dominates the language that we end up using. The article above was another example of massive LYING BY OMISSION!

There can be NO "capitalism" not even "crony capitalism" (crapitalism), inside of a system where private banks are legally allowed to make "money" out of nothing as debts. Similarly, it is MEANINGLESS to put forward the label of "socialism" for a system wherein the theoretically public power over the public money supply has become "money" out of nothing as debts, which has been almost totally privatized.

The real world operates according to the principles and methods of organized crime. All other labels for various "isms" or "ocracies" are deliberate bullshit, which most people have been brainwashed to believe in.

The supreme ideology is militarism, the ideology of the murder system, which is the oldest and best developed social science, which is profoundly paradoxical because success depended upon backing up deceits with destruction. Economics was built on top of militarism, in ways which deliberately deny and ignore that as much as possible.

The dictionary definitions of "socialism" or "capitalism" etc., have practically nothing to do with the real world, which is actually dominated by murder and fraud. However, since social success was based on those realities, people use utterly bullshit language, like this article above did.

Sun, 07/27/2014 - 09:24 | 5009390 Escrava Isaura
Escrava Isaura's picture

Radical Marijuana,

That was pretty good!

Sat, 07/26/2014 - 17:48 | 5008042 disabledvet
disabledvet's picture

Yeah, no shit. "Let alone Nationalism."

You gonna pay for that bitch or not?
Where's your GOD DAMN TRILLION DOLLARS ASSHOLE.

Sat, 07/26/2014 - 18:07 | 5008043 Sudden Debt
Sudden Debt's picture

Actually your rigth.
socialisme is a need for society.
A society can be judged by how it handles it's weak. And yes, America is failling bigtime in a psychopathic kind of way.
So socialisme is good BUT it may never grow to big. And that's where the problem lies. We don't want to get rid of it at all, just keep it under control.

Actually, socialisme has nothing to do with the problems. It's government spending and a to big government.
The media just likes to blame socialisme because the government wants nothing more than the people to chip in for a even bigger government.
Know thy enemy, art of war.

And ever since the 70's equality has gone down. Most Americans have no clue what that means but that means, everybody has the same chance to making it. And now, there's about 100 rich ass mother f's who are making sure God only blesses them and that everybody else sneezes.

What we need is a smaal government who is social in behavior but who's not socials and the total distruction of lobbying and backdoors in the taxaction system so every company pays the same kind of taxes and no matter how rich or poor, everybody should also pay the same kind of taxes on a % basis.
No taxes doesn't work like most Americans want because that means the government needs their own income generating companies and than you get into the socialist government type with corruption again.

Sat, 07/26/2014 - 18:46 | 5008161 Matt
Matt's picture

Why is it the duty of government to forcebly redistribute wealth to care for the weak?

Why shouldn't caring for others be voluntary?

Sat, 07/26/2014 - 21:54 | 5008564 Leveraged Algorithm
Leveraged Algorithm's picture

Naive you are - take care of the other to avoid the pitchforks.....

Sun, 07/27/2014 - 00:03 | 5008832 RichardParker
RichardParker's picture

Actually Naive YOU are:

 

They throw a few crumbs to the lower and lower-middle class in order to pacify them while preventing the upper class from becoming powerful enough to be able to challenge their authority as elected kings.

Sun, 07/27/2014 - 04:42 | 5009127 Sudden Debt
Sudden Debt's picture

Well, not everybody is as strong.
I'm not saying that those who can take care of themselves should be cared about!
No, I talk about people with handicaps, people who are sick, weak, children. Older people.
But those who can contribute should pull their own weight.

But that's just a European point of view. If your society is different than it's different. For example, i'm not in favor of changing the thinking in Africa either. There the family takes care of the weak.

Sat, 07/26/2014 - 18:55 | 5008187 nmewn
nmewn's picture

"Actually your rigth. socialisme is a need for society.
A society can be judged by how it handles it's weak."

I think you mean charity and compassion, which you can do & have without being a socialist and delegating those positive virtues to the government because it always leads to...

"So socialisme is good BUT it may never grow to big. And that's where the problem lies. We don't want to get rid of it at all, just keep it under control."

Paraphrasing someone, a government big enough to give you everything you want, is also big enough to take everything you got.

 

Sat, 07/26/2014 - 19:51 | 5008310 shovelhead
shovelhead's picture

A little bit Socialist is like a little bit pregnant.

Sat, 07/26/2014 - 20:01 | 5008330 nmewn
nmewn's picture

Yes and a pregnant socialist always gives birth to a bouncing baby communist.

Thats an original by the way ;-)

Sun, 07/27/2014 - 09:36 | 5009407 Bendromeda Strain
Bendromeda Strain's picture

Well played, Sir  <golf clap>

Sat, 07/26/2014 - 19:14 | 5008249 UGrev
UGrev's picture

Smoke another. Socialism is not what we need in any way, shape, or form.  Anything to the left of "leave me the fuck alone" is socialism, fascism or [name your type of oppressive government system here]. That is why people scream socialism when it's not "the American way". Fundamentally, we reject anything that forces people to behave a certain way, and enforces it by way of a gun up our collective asses. We should be a volunteerist society that helps because we are impassioned to do so, not because we are forced to do so at the cost of a potential threat to our own survival. Failure to understand that is nothing short of accepting that people be stolen from by way of force for the good of others..so long as it's not you who is being stolen from. 

Please wake the fuck up already..  

Sat, 07/26/2014 - 19:23 | 5008266 Escrava Isaura
Escrava Isaura's picture

Fascism: Heavily on patriotism and national identity. It exalts nation and race above the individual and stands for severe economic and social regimentation, and forcible suppression of opposition.

Socialism: Workers through cooperatives own all industry. Main aim is to abolish the exploitation of man by man. Public services may be commonly or state owned, such as healthcare and education.

Sat, 07/26/2014 - 19:43 | 5008300 UGrev
UGrev's picture

Both enforced by goons with guns. Neither of which is a truly humanitarian system. The only system that works is volunteerism. The problem is that there are people that project their own psychosis upon an an entire population and because they are liars, cheats, theives and closet serial killers, they think everyone else is the same way. Then, some of those people end up getting elected and the rest is hitory .. again. 

 

Sat, 07/26/2014 - 19:52 | 5008315 Escrava Isaura
Escrava Isaura's picture

“If you ARE NOT going to read, do yourself a favor and SKIP all the clichés by outright liars,… just brazen propagandists that you find in journalism and academic professionals. The world is much more complex than that” Noam Chomsky

Sat, 07/26/2014 - 20:19 | 5008369 UGrev
UGrev's picture

You make ZH "stoopider" with your presence. You are not happy with the truth and so you follow suit of all people who cannot critically think for themselves.. quote drop like a little bitch. 

Let me help you with your screwed view of humanity.  When you have no fucking choice but to live in a system or die, you live in the system. Very few people venture out and risk their lives for something better when they are just as  happy to roam around with some range of freedom they deem acceptable. We call these people "Free Range Sheep". Europe is full of them; and while it appears to "work well", it's still tyranny.  So please keep your Euro-shit ideas of socialism over on your side of the pond. America doesn't want that shit here. We do not like snake oil.. so peddle it someplace else. 

Sat, 07/26/2014 - 20:34 | 5008395 Escrava Isaura
Escrava Isaura's picture

UGrev,

1) We're on the same side of the pond

2) Who cares about Europe?

3) You're the one with screw view of humanity. Go ahead. Venture out your frustration in volunteerism.

Sat, 07/26/2014 - 21:07 | 5008413 UGrev
UGrev's picture

So now here's the punch-line. The problem with people like you who want socialism is they don't care if anyone else wants it.. it's just "you're going to get it and you're going to like it"..  Do you like war? Becuase if you keep pushing that shit down our throats, that's what you're going get. 

In contrast, allowing people to decide what's best for themselves, which includes the ability to decide if they CAN help others and are also WILLING to do so, is a far cry from making people like your system of government because there really isn't any restricutions other than "don't murder, don't defraud and don't enslave". 

Enjoy your weekend.. and remember.. stop projecting your weaknesses upon others. 

Sat, 07/26/2014 - 21:45 | 5008549 UselessEater
UselessEater's picture

Socialism is a tool, a means to an end for the elite.

Builderburg goals via D Estulin: ‘a new-colonial world economic order based on the concept of a world company…requiring the elimination of the nation-state. Goals:

1.       1. One international identity

2.       2. Centralized control of the people

3.      3.  A zero-growth society

4.       4. A state of perpetual imbalance

5.       5. Centralized control of all education

6.       6. Centralised Control of All Foreign and Domestic policies

7.       7. Empowerment of the UN

8.       8. Western trading bloc

9.      9.  Expansion of Nato

10.   10. One legal system

11.   11. One socialist welfare state

Assisted by the Trilateral Commission formed later with the goal of creating ‘an international alliance that would create strategies to consolidate the 4 pillars of power- political, monetary, intellectual and ecclesiastical – under a central world government

From Babylon’s Banksters, Dr Farrell p 58-59

Sat, 07/26/2014 - 23:39 | 5008804 Escrava Isaura
Escrava Isaura's picture

UselessEater,

If you're going to use the word 'Centralized Control’ you will need to replace the world 'Socialist" with the word 'Fascist'.


Sun, 07/27/2014 - 00:12 | 5008861 UselessEater
UselessEater's picture

It was a quote from those who have had access to Builderberg meetings... not my words.

To be honest I see little difference at the end of the day between socialist and fascist, both regimes will make it virtually impossible for me to run my own small business and live as I want; both regimes pre-suppose that a few know better than I what is good for me and both regimes will support a small elite that can live better than I which ensures their self-interest is above mine.

If your goal on ZH is just to pick fights and be contrary so be it. Most of us come here to learn and we get a huge library of sources and links to investigate for ourselves. That involves lots of reading and self-questioning. Its hard work but IMO worth it.

One gift I got from ZH was the need to learn more about the Republic nature of the USA Constitution - Im not American, I'm in socialist Australia... however, I now have a grand respect for the US Constitution and now understand why its been fucked with since day one thereby contributing to the distortion of taught ideologies and terminology.

I DO NOT CARE what it is called. Leave me and mine alone, we're good hard working people who give a shit about our neighbours and wildlife...but each and every simplistic ideology that suits crony -socialists/fascists/whatever cult has their face in my business and crushes the independence of my local community wherever I go.

After watching this for 30 years on three continents under 4+ regimes of extreme left/right I am sick of it. Its destroyed thousands of lives of people I have been variously connected to through work, family, etc. Each time the same asshat names are linked to each regime like freaking Kissinger, CFR, Trilateral Commission.

Play your word games all you like, death follows both regimes you are so pedantic about.

 

Sun, 07/27/2014 - 09:40 | 5009416 Bendromeda Strain
Bendromeda Strain's picture

Yes, because the Bolsheviks were so decentralized. You forgot the sarc tag.

Sat, 07/26/2014 - 21:59 | 5008573 Anusocracy
Anusocracy's picture

Escrava Isaura, I want you to have whatever form of government and economic system you want.

You should be free to choose and I should be free to choose, but why do people with your mindset feel like you're entitled to force your beliefs on everyone else?

Have you ever thought, even for a second, that your mindset works only for people with your mindset, and that it fails for all others?

You should, and it does.

Sat, 07/26/2014 - 23:04 | 5008728 UselessEater
UselessEater's picture

Until one learns who has manufactured and fostered an ideology its hard to critically examine it.

Hence I tried to show some linkage to the Rockefeller and Rothschild level of elite interference into world affairs. It was with the hope that those who see good in socialism get suspicious at who is driving socialism i.e. the very men they despise as "cannibalistic - capitalists" and who are behind the actions described in Confessions of An Economic Hitman.

It is always hard to realise that you have been hoodwinked. However, in today's world that is actually a rite-of-passage into adulthood. Our rites-of-passage have been stripped and twisted to keep us in an infantile state of adulthood; it ensures we seek government protection without realizing we have asked our rapist to protect us.

IMO if we on ZH, inform Escrava enough to get her to question - then we have probably informed many others. Their personal conclusion is their own business, however a rite-of-passage may have been made and eyes are more wide open than before.

Sat, 07/26/2014 - 23:13 | 5008749 Escrava Isaura
Escrava Isaura's picture

Anusocracy,

 

The form of government that I want is irrelevant. But name it properly, and understand its goals, are a must.

 

US is NOT socialist. Neither is Russia.

 

US is a “State Capitalism System” run by the “Ruling Elite” [academia].  

 

UselessEater mentioned (TC) ‘Trilateral Commission”. So let’s use it as a baseline.

 

Please, let’s keep this civilized and exclude conspiracies, OK?

 

TC = US, Europe, and Japan

 

Goal = People are too stupid. We will run the nation for you

 

Goal’s Problem = Can NO longer grow, actually, sustaining it, because we live in a finite planet.

 

 

Trilateral Commission for Dummies

 

By Noam Chomsky: The liberal wing of the intellectual elite. That’s where Jimmy Carter’s whole government came from. [The Trilateral Commission] was concerned with trying to induce what they called ‘more moderation in democracy’ – turn people back to passivity and obedience so they don’t put so many constraints on state power and so on. In particular they were worried about young people. They were concerned about the institutions responsible for the indoctrination of the young (that’s their phrase), meaning schools, universities, church and so on – they’re not doing their job, [the young are] not being sufficiently indoctrinated. They’re too free to pursue their own initiatives and concerns and you’ve got to control them better.

 

Key Point

 

Patience! State capitalism, as well as the ruling elites, are searching for lifesavers.

Sun, 07/27/2014 - 00:06 | 5008848 UGrev
UGrev's picture

Stop believing people have control over you and all that contradictory bullshit you just posted.. it all goes away. 

Sun, 07/27/2014 - 00:11 | 5008855 Matt
Matt's picture

What exactly is "State Capitalism"?

What capital does the state own/produce?

How does a State get a return on Capital?

Sun, 07/27/2014 - 09:02 | 5009354 Escrava Isaura
Escrava Isaura's picture

Matt,

What capital do you, Matt, produce? I mean, do you harvest? Do you mine? Can you manufacture something? Can you print money?... all in excess of your needs.

So, what's ‘Matt’s’ capital? Most likely, none.

But say your work in manufacturing, and it is very successful business. Wall Street comes to buy [Capitalism] but, you the workers decided [democracy] that you, the workers want to buy it [socialism].   

State Capitalism [neo-classic ‘academic’ economics] is a by-product of Empires. But other nations copy it.

Sun, 07/27/2014 - 10:16 | 5009486 Matt
Matt's picture

If the workers buy their business from the current owners and become the new owners, that is not socialism.

If the government takes the company from the owners and either runs it for itself or gives it to the employees, that is socialism.

harvesting, mining and manufacturing are activities. It is the farm, factory, the equipment, that is the capital.

printing money is not owning or creating capital.

Sun, 07/27/2014 - 11:12 | 5009548 Escrava Isaura
Escrava Isaura's picture

Matt,

1) Where do you see your second paragraph happening?

2) Activity and capital? You're drinking too much Kool-Aid.

Human beings are more important, otherwise, you will start sounding as a Fascist.

Ask yourself this question: "Is Le Broom James an 'Activity' [labor] or is he 'Capital' [tool]?

 

Sun, 07/27/2014 - 15:03 | 5010123 Matt
Matt's picture

1) Venezuala, Argentina, lots of places the governments have nationalized industries, notably oil production.

2) The skills of the basketball player are his capital, along with money he earns then saves for future investment. Whether the league and his team's owners view him as labour or capital, I have no idea. I suppose an athlete would count as labour, if you want to force a binary definition.

Human beings are more important to who? How do those human beings get fed and clothed? By the products of labour and capital.

Sun, 07/27/2014 - 17:00 | 5010441 Escrava Isaura
Escrava Isaura's picture

You sure buy into the propaganda.

It's obvious that you don't know the history of how multinationals became to be. And how these multinationals operate. Great indoctrination, you had.

However, you did answer question 2.

So let's move on.

 

Sun, 07/27/2014 - 00:12 | 5008859 RichardParker
RichardParker's picture

Escrava:

I think what you meant to say was "Fascism and communism are two variants of statism. Both are forms of dictatorship. Neither one recognizes individual rights nor permits individual freedom. The differences are non-essential: fascism is racial statism and communism is statism of economic class..."

Sun, 07/27/2014 - 08:30 | 5009302 Escrava Isaura
Escrava Isaura's picture

RichardParker,

Fascism and/or Communism are what comes after Statism fails.

So you description is correct.

Sat, 07/26/2014 - 19:08 | 5008228 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

"As we all know, socialism is the ultimate form of freeloading. It has never worked, and it never will."

In Scandinavia, Social-Democracy has actually worked very well for many decades.

Sat, 07/26/2014 - 19:18 | 5008252 UGrev
UGrev's picture

Purely subjective bullshit. You're trying to refer to a society that accepts it as "working well".. I could say the same thing about a submissive sex parter who enjoys canon ball sized anal beads up her ass, but in reality, that is not "working well".. it's abhorrent to most; an aberration of normalcy. 

Sat, 07/26/2014 - 19:23 | 5008265 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

There is nothing subjective about having among the highest living standards, literacy rates and educational levels in the world. Such things are the result of well researched and well functioning policy.

Sat, 07/26/2014 - 19:45 | 5008304 UGrev
UGrev's picture

My submissive has the best orgasms.. doesn't mean her anal cavity is in good standing. 
At what cost do we accept successes? To willfully opress a people in order to ensure a goal of subjective success is immoral. You simply cannot take from everyone for the benefit of others. Ethics.. they do exist.  

Sun, 07/27/2014 - 00:07 | 5008846 slightlyskeptical
slightlyskeptical's picture

Socialism is not taking from everyone for the benefit of others. You show how little you really know.  Socialism actually prevents the taking from everyone by the ruling class.  Capitalism creates welfare states not sociaiism. Those who exploit others need to be opressed and not the other way around.

Socialism for our needs.

Capitalism for our wants.

Sun, 07/27/2014 - 00:19 | 5008871 UGrev
UGrev's picture

Do you really believe the shit that comes out of your mouth? Do you even know how socialism is enforced? yah.. buy guns and goons. When someone wants to actually own his own property, those involved in the disallowing of that because everything must be owned by everyone, the only way to enforce it is by tyranny. That's your fucking socialism. So while it may not be some ruling class, it ends up being mob rule which is no fucking better you ignorant tart. 

When private ownership is allowed, growth is incentivized and when you realize that life isn't fucking fair, you will dispense with this socialism bullshit post hate. Stop trying to make a world of celebrated mediocrity; that's no progress. Individualism is the singular, most progressive means to success than tryingn to spread a finite resource around to everyone. What you do, in effect, is break those, who can excel, down to a level which holds back progress as a whole. If you TRULY believed that the greater good was your goal, you would let nature take its course and those who would bring us advancements through knowledge and skill as a result of not being hindered by some self centered "Everyone must be equal" mantra would share a wealth of knowledge and incarnations thereof that would be beyond our wildest dreams. 

Set yourself on fire.. the world doesn't need retards like you. You make shit worse and you're too fucking stupid to realize it. 

Sun, 07/27/2014 - 00:28 | 5008897 UselessEater
UselessEater's picture

Great post, kinda though the 2nd last sentence too harsh.

We're dealing with fear, well honed fear instilled in people to make them think that if we do not have an equalizing-protector then the world is Mad Max. This is the point of the wars and horrors and destabilization's that induce poverty in resource rich nations all backed by the usual suspects making fortunes.

Sun, 07/27/2014 - 00:46 | 5008938 UGrev
UGrev's picture

I don't. I am not here to convince him that he is wrong; however, if someone else reading it who might be teetering on socialism vs individual ownership and self directed life goals without the daily threat of being forced to suck cock in some jail because you want to ingest something that someone else thinks is not a good idea.. then that's all that matters. 

It's hard to convice died in the wool socialcunts to undo years of programming that fear into them. It's all they know and they will fight to keep it, because it will mean that they will have to forgoe, potentially, decades of investment into a system that is so wrong on so many levels that to have to start over would be emotionally crushing to them.

What they don't realize is that starting over as an individual who is free from tyranny is the easiest thing to do. You have no fear hanging over your head other than what can be generated from natural risk taking. The day you start believing in freedom for everyone, you have come decades further than the entire effort of trying to program yourself to believe something that you know, deep down inside, is wrong.  No more tip-toeing around bullshit laws and gorilla's with riot shields who are nothing short of face-less robots. 

It's humanity.. it's why we have wars. Humans would rather fight for 10 than to admit that the past 30 were a fraud ( to use abitrary times). 

So fuck'em... he's lost. The only use I have for him is to illustrate to others you can't save everyone but you can save yourself and in so doing, you can VOLUNTARILY engage in social contracts with people for the betterment of yourself, or whomever you seek prosperty for.  People like him, who want to control others are the bane to any free mans' existence. They are poison upon humanity and I will not force them to change because I disagree with them.. they will eventually come to understand the mathematics behind the subsidised life they want to create. 

So no apologies from me.. but thanks for the vote up. 

Sun, 07/27/2014 - 01:45 | 5009000 UselessEater
UselessEater's picture

Great way with words sir.  

Dr Farrell explains in a way, the use of socialism etc to further the 'closed system' view that supports the not so omnipotent whackos in the Bilderberg and other groups ie they have a hive/herd mentality that views the world economically, conceptually, physically and politically as a closed system i.e. the whole premise is scarcity and non-renewability...Hence the drive to subsume scientific developments in energy that may shift the source of the world energy supply and hence the financial system 'to a new basis'... no longer needing to be reliant upon their own monopoly financial power to create the medium of exchange and credit i.e. a closed system gives them power an open system threatens them.

An interesting perspective, my point is that many of our fellow useless eaters subscribe to the closed-system ideology and therefore scarcity fear.

They have to learn that an open-system perspective has existed, it is possible and it is desirable, and has in fact been blocked - fiat money is but one example.

Apparently we climbed down from trees and learned to make fire, then send a man to the moon with an iPod. If your view point is that the best humanity and ingenuity has to offer is scarcity within a closed system, you disregard many years of innovation and development by those who got off their butts and created something.

Instead you pay credence to those who look at what others created and decide how to take a piece and control it - this action makes a lazy average man as bad and as equal as an elite parasite.

Whether you're  average Joe or Rockefeller get your hand out of my pocket and nose out of my business; neither of you are creating a damn thing of productive value and your capacity to extract from productive people is appalling.

 

Sun, 07/27/2014 - 01:55 | 5009006 UGrev
UGrev's picture

Thanks, and sorry for the lack of punctuation.  Transitionig from writing Javascript and C#, to English .. sometimes the results are not so good ;)

Sun, 07/27/2014 - 02:27 | 5009038 UselessEater
UselessEater's picture

What they don't realize is that starting over as an individual who is free from tyranny is the easiest thing to do. You have no fear hanging over your head other than what can be generated from natural risk taking.

You are more forthright than I, however your point about NATURAL RISK TAKING can't be stressed enough. This is the challenge we have with socialism and crony-capitalism its designed to suck up those fearful of natural risk taking. 

We live and grow by our risk taking, a well lived life involves taking risks. It can be a great challenge, but there in lies the difference between existing and living.

I own my mistakes, my efforts and my independence. However I am forced to understand and function within the dominant systems. In a sense I have to have two minds and function well as a personal sovereign and a subject.

You are provoking some thought at least in my contemplations. So cheers.

 

 

Sun, 07/27/2014 - 00:23 | 5008887 Burnbright
Burnbright's picture

Socialism actually prevents the taking from everyone by the ruling class.

Uh noo....

That statement wins the award for the most dumb fucking naive statement made this year. I am sure the ruling class will just give people their own money to help them not be so poor lolololololololol!

 

Every other system other than capitalism restricts or removes your right to property and every other government other than one ruled by law uses paper money to pay for its debts (paper money is a way to transfer wealth through inflation). 

 

Sun, 07/27/2014 - 00:33 | 5008908 UselessEater
UselessEater's picture

+1 up vote arrow not working on your post

Sun, 07/27/2014 - 04:52 | 5009130 Eirik Magnus Larssen
Eirik Magnus Larssen's picture

You are a tragic product of the American educational system.

Sun, 07/27/2014 - 07:13 | 5008323 nmewn
nmewn's picture

What is "Scandinavia's" policy? ;-)

Sat, 07/26/2014 - 19:57

///////

Just as I thought, introduce an invisble strawman, then after asking everyone in the room to borrow a lighter, you can't even locate the invisble strawman.

Sun, 07/27/2014 - 00:37 | 5008918 reTARD
reTARD's picture

And the sustainability of said highest living standards? Revisit in 5-10 years?

Sun, 07/27/2014 - 15:36 | 5010230 Matt
Matt's picture

This. I expect much of Scandinavia's wealth is because of resources, and once the non-renewabnle ones are gone, they will either lose their quality of life or use their capital accumulated during their resource boom to rent-seek other nations through their Sovereign Wealth Funds. Socialist Bougoise!

Sun, 07/27/2014 - 08:09 | 5009276 smacker
smacker's picture

That's a very subjective view presented as a fact.

Why don't you tell us all about the giant nanny states that exist in Scandinavian countries? And the levels of taxation etc.

In the end, it comes down to how much freedom a person wants and how much of their lives they want to be controlled/supervised by The State. I'll go for max freedom and leave all that socialist nanny-state crap to others.

Sat, 07/26/2014 - 20:36 | 5008400 HumanResourceProblem
HumanResourceProblem's picture

He is French.

Sun, 07/27/2014 - 19:53 | 5010942 Twodogs
Twodogs's picture

Diddums has his sugar daddy threatened. Go bludge off someone else.

Sat, 07/26/2014 - 17:51 | 5008029 Sudden Debt
Sudden Debt's picture

Before Germany entered WO1, they where the richest country in the world.
And they actually where the only country that had a pension system for everybody.
Than they got cocky and entered WO1, lost it, started printing to make up the difference and entered hyperinflation.

Now where do we stand now?

America was the biggest
America has lost the war against terrorisme
And now they're printing like there's no tomorrow

Sat, 07/26/2014 - 17:55 | 5008056 disabledvet
disabledvet's picture

German SOLDIERS lost World War I...but not Germany.

Belgium more than anyone should know that the bulk of World War I was fought in France. The casualty rates of the French and British simply defy description in "the Great War" although what the US Republic endured during its Revolution, the Mexican/Amercian Campaign and its "Civil War" were comparable.

This is what "Teddy" Roosevelt understood from his "great adventure" into Cuba. War should never be a first resort...and so it was with him.

"Paint the Battleships white...be not afraid."

Sat, 07/26/2014 - 18:01 | 5008063 Sudden Debt
Sudden Debt's picture

No, not really, almost all the fighting was in Belgium.

Sat, 07/26/2014 - 18:01 | 5008064 piratepiet
piratepiet's picture

Who started printing ?  Germany ? Or the Reichsbank ? What control did  the majority of Germans have over the Reichsbank, a private bank ? 

Sat, 07/26/2014 - 18:02 | 5008065 JR
JR's picture

Much of the revised history of WWI was buried under U.S. and British propaganda, and the push to get America into World War II - with its blanket subversion and lies - put World War I into the rearview mirror.

But the truth of World War I is more important today than ever.

This from David Hoggan’s “The Myth of the ‘New History’”:

“In a series of articles during 1920 and 1921, Harvard’s Professor Sidney B. Fay demonstrated conclusively that responsibilities had to be shared among the nations involved on both sides. Fay’s detailed two-volume work in 1928 also contained an attempt to establish the relative order of guilt among the nations…

“He listed the guilty parties in the following order: Serbia, Russia, Austria-Hungary, France, Germany and Great Britain. The odd thing about this order of rank is that Great Britain and Germany, the leaders of the respective European alliance systems, are assigned the least guilt. Harry Elmer Barnes, in his 1926 volume dealing with both 1914 and 1917, adopted a similar order of rank except that, unlike Fay, he considered British responsibility to be greater than German.

“Like Fay, however, he was prepared to assign the primary responsibility to Serbia, Russia, Austria-Hungary and France.”

Germany, which had given strong support to any policy Vienna might adopt later tried to modify that. Then, when Russia mobilized on the German border, the Germans felt surrounded and pushed into war from threats coming from Britain, France and Russia.

Continues Hoggan:

“It is well-known that Tsar Nicholas II of Russia delayed the general mobilization order of his country for twenty-four hours before approving it most reluctantly. Would there have been any chance of his signing this document had not Sir George Buchanan, the British Ambassador, urged the Russian leaders that mobilization was necessary? Would the French have joined the British in urging this Russian mobilization had they not counted on British support?”

World War I… 9,000,000 lost their lives. World War II... 48,000,000.  And now, a century later, the lies and the bullets still serve the cabal.

Sat, 07/26/2014 - 17:50 | 5008046 buzzsaw99
buzzsaw99's picture

au contraire mon frere socialism does work, whereas capitalism does not even exist. could have done more with the bond angle too if you want to decry price fixing. as in the higher the debt to gdp the lower the interest rate. ruminate over that one for awhile.

Sat, 07/26/2014 - 18:02 | 5008066 FeralSerf
FeralSerf's picture

"ALL SOCIETIES ARE CAPITALISTIC. The ONLY difference is who owns/controls the Capital. You don’t really think Communists are trying to get rid of Capital do you? You're either going to live under a Monopolistic Capitalistic Oligarchy, or a Competitive Capitalistic Republic. There aren’t any others" - Sui Juris

Sat, 07/26/2014 - 22:54 | 5008701 NotApplicable
NotApplicable's picture

Well said. This is one of the saddest ZH threads I've encountered (even as compared to the hateful divide and conquer ones that appear daily). It amazes me that so many seek violent solutions to alleged harmonic ends. Why are they so afraid for others to be free?

Sat, 07/26/2014 - 17:54 | 5008054 kito
kito's picture

down with low cost indexing!!! hooray for high cost active management that trails the index 99% of the time!!!!

Sun, 07/27/2014 - 06:42 | 5009191 barroter
barroter's picture

I have some assets and active money managers can't get to them! Go dig deeper into someone else's pocket you thieves.

 

Sat, 07/26/2014 - 18:06 | 5008073 falak pema
falak pema's picture

you keep singing the pure market mantra as if capitalism was like the Virgin Mary; pure and pristine.

Capitalism is as much a means for the powerful to get more power as it is a means to achieve efficient allocation of money.

What you forget is the logic of power in capitalism is Short term by self interest as opposed to long term for the general good. 

And when leverage gives the Oligarchs the advantage short term it becomes "now and all" knee jerk. Time and again. And the 6% is a chimera like Greenspan's bubble.

Who speaks for the long term to a deaf and dumb Oligarchy controlled "winner take all" casino market? 

You want to live ONLY in the present? You lose the future... That is ultimately the mantra of Reaganomics and it has nothing to do with socialism.

Go look for your Virgin Mary capitalism on the Mayflower...where the puritans landed in the land of the Tomahawk carriers. 

The Tomahawk was a purer form of entrepreneurial capitalism than the Winchester. 

Sat, 07/26/2014 - 18:36 | 5008139 potato
potato's picture

capitalism isn't about the powerful acquiring more power. 

critiques of capitalism are often mixed up with state coercion (regulation, subsidies, taxation) which can be unjustly hijacked by the rich and powerful surreptitiously buying out the candidates elected to office.

Sat, 07/26/2014 - 19:06 | 5008216 falak pema
falak pema's picture

Taxation and subsidies are tools to achieve an end. The government can also be a player in the economy. It can also feed new investment by kick starting it like it did the Internet via subsidies or tax incentives.

Why this notion that ONLY private enterprise is the only actor in capital societies? 

If you think that the rich waited for government bureaucracies to exist to buy their power you haven't read history.

Before they "bought" government bureaucrats they bludgeoned the people when might was right.

Without government we go back there ; its called feudalism.

You want to turn the clock back? 

Jefferson was government.

 

Sat, 07/26/2014 - 20:04 | 5008341 shovelhead
shovelhead's picture

Then let govts start their own businesses to spend their own money.

They can kickstart anything they want with the profits.

I think they started the internet with the profits from the post office.

LOLOL.

Sat, 07/26/2014 - 20:24 | 5008347 Escrava Isaura
Escrava Isaura's picture

shovelhead,

NO. They DID not!

Now, do you want keep thinking nonsense... or to research the correct answer?

Sun, 07/27/2014 - 03:22 | 5009092 hedgiex
hedgiex's picture

Good description of the symptom i.e. Capitalism under Captivity.

What about the causes ? Couch potatoes not part of the equation and still doped by the Captors ?

Sat, 07/26/2014 - 18:09 | 5008079 Reaper
Reaper's picture

To question index funds challenges our simplistic market advisers orthodox dogma. The reality is that Nature and businesses are always evolving. What was will not always be.

Sat, 07/26/2014 - 18:14 | 5008090 ramacers
ramacers's picture

  ready the blade w/intrepitude.

Sat, 07/26/2014 - 18:39 | 5008146 Downtoolong
Downtoolong's picture

I would say the even greater risk of indexation is centralization of power over markets. Control (manipulate) the market for the index and you automatically do the same for everything priced off the index; which is just about everything in all markets these days; including $trillions in undisclosed OTC derivatives.  

Sat, 07/26/2014 - 19:07 | 5008224 smacker
smacker's picture

Brilliant article. But it misses to point out that central planners and other assorted socialists (actually Marxists) simply do not understand the very concept of "price discovery" because that implies people are free to negotiate a price in a free market based upon due diligence and what the seller will accept etc without The State being involved. That is intolerable. Their view is that The State has to be involved in everything, otherwise how can things happen in accordance with policy and how can they remain in control of society, which is central and essential to socialist philosophy.

Thus, the concept of "price discovery" and "free markets" cannot exist under socialism. Everything must be centrally planned and decided by The State and its army of apparatchiks, because that makes it fair. The word "free" will be expunged from the language before long.

Sat, 07/26/2014 - 19:58 | 5008324 Escrava Isaura
Escrava Isaura's picture

smacker,

Where do you learn these things?

US universities?

Sun, 07/27/2014 - 02:44 | 5009060 smacker
smacker's picture

It's very unlikely any university would teach such stuff. The US & UK educational establishments were infiltrated and taken over long ago by Left-wing progressive thinkers and their role is to paint socialism in its best possible light. Hence we see terms used like: "justice" "fairness" equality" and a whole bunch more which are only intended to deceive the masses because none of these things exist under socialism, only corruption and incompetence.

My views on socialism are derived from years of studying it, talking to other free-thinking scholars and studying the MO of political elites who - even though many deny it - are mostly Left-leaning. The reason is simple: only socialism - and countless other heads of the hydra - offers its adherents and followers the opportunity of exercising power and control over the lives of others, initially by coercion and when that fails, ultimately by jackboot force. That's a prize too big for them to let go.

And when it all goes wrong - as it always always does - they simply withdraw, regroup and reinvent themselves, ready for the next onslaught against freedom.

Thus, every new govenment enters office with an agenda to create more laws, more regulations and more social controls. And of course more taxes to pay for it all.

And in truth,  millions of people actually want that. They like the idea of handing over responsibility for running their lives to a "higher authority" called government.

I have never heard of any political party winning an election by promising "when I leave office, government will be 20% smaller than when I enter office."

Sun, 07/27/2014 - 05:13 | 5009142 BruntFCA
BruntFCA's picture

Ronald Regan campaigned to something to that effect. I think he expanded government massivly!

Remember however, he was shot pretty soon after entering office. He was never really the same since then; make of that what you will.

Sun, 07/27/2014 - 07:44 | 5009236 smacker
smacker's picture

Indeed. Ronald Reagan was one of the many political enigmas who presented himself as a freedom-loving person to win votes but his actions revealed another side. It just goes to show that it's always best to look at what they do, not what they say.

Sun, 07/27/2014 - 09:36 | 5009405 Escrava Isaura
Escrava Isaura's picture

smacker,

Please check Zero Hedge's thread (link) below. You'll appreciate it...., I think.

http://www.zerohedge.com/news/2014-07-13/what-power-consumption-telling-...

 

Sun, 07/27/2014 - 13:07 | 5009820 smacker
smacker's picture

One thing I learned years ago is that when one incarnation of socialism fails, its followers simply abandon it and reinvent themselves using different labels and some new con-policies and set about explaining their wonderful new found utopia using whole sermons when short sentences will do perfectly well. The aim of course is to put listeners to sleep so they won't see thru the garbage being spouted.

It was no coincidence that Neil Kinnock, ex Leader of the British Labour Party was known as "The Welsh Windbag" because he couldn't stop his gums flapping. And more recently, Gordon Brown, ex British PM was known as "The Scottish Blatherer" who lectured people endlessly on his Endogenous Growth Theory, which was actually complete bunkum from top to toe. Both were hard line socialists/Marxists and neither could say anything without boring people to death. Not unlike those sermons that took place in the Kremlin during the halcyon days of the USSR.

Socialism is for people who cannot think & act for themselves and need The State to tell them what to do. To that extent, socialist political parties fulfil a gap in the marketplace, although it would be far better that people were taught how to stand on their own feet.

Sun, 07/27/2014 - 17:54 | 5010623 Escrava Isaura
Escrava Isaura's picture

Smacker,

One good point. And two blunders:

You said: Endogenous Growth Theory, complete bunkum. -- Correct

Then, you said: Socialism is for people who cannot think & act for themselves and need The State to tell them what to do… taught how to stand on their own feet. -- False. Go tell that to the socialist Amish, in America, and the Kibbutz, in Israel that they don’t work hard. They will laugh at your face.

Again, you: socialism fails, its followers simply abandon it and reinvent themselves using different labels

I’ll let the link below debunk it:

https://www.youtube.com/watch?v=K4Tq4VE8eHQ

 

Sat, 07/26/2014 - 19:34 | 5008280 michigan independant
michigan independant's picture

Communism was a creation of International Finance. Churchill was correct it was going to end badly. For a possible explanation, one should perhaps start with the trauma of the Bolshevik Revolution. “Bolshevism is not a policy; it is a disease,” Churchill said in the House of Commons on 29 May 1919, adding, “it is not a creed; it is a pestilence,” thus starting a long series of highly offensive medical metaphors in his attacks on the Bolsheviks. In June, he described them with the suggestion of mental illness as a “league of failures, the criminals, the morbid, the deranged and the distraught.” A variant was “the vampire which sucks the blood from his victims,” used in the House of Commons in March. Later in the year, on 6 November, he took up again his extreme vocabulary of insidious epidemics in his description of Lenin’s journey back from Switzerland in the House of Commons.

 

The Germans unleashed Lenin with 10 million to destroy Russia. 

 

According to Golitsyn, after the United States military is eliminated as a strategic threat to Russia, the long-range strategic Russian plan is to pursue Lenin’s goal of replacing nation states with collectivist model of regional governments as a stepping-stone to global governance. Isn’t that exactly what we see with the European Union, the North American Union and the emerging African Union? In order to achieve their final goal, Golitsyn stated that Russia, after lulling America to sleep, will join with China in order to attack the United States from both the outside and inside as he detailed that “In each of these the scissors strategy will play its part; probably, as the final stroke, the scissors blades will close.

Rock, gold - paper, fiat  - scissors, road to serfdom 

Wake up 


Sat, 07/26/2014 - 20:12 | 5008354 Escrava Isaura
Escrava Isaura's picture

michigan independant,

Wake up..... And be careful with the scissors

Sat, 07/26/2014 - 19:40 | 5008292 q99x2
q99x2's picture

There is no "We" you imbecile.

Imbecile was a medical category of people with moderate to severe intellectual disability, as well as a type of criminal.[1][2] The term arises from the Latin wordimbecillus, meaning weak, or weak-minded. It included people with an IQ of 21–50, between "moron" (IQ of 51–70) and "idiot" (IQ of 0–20).[3]

The meaning was further refined into mental and moral imbecility.[4][5] The concepts of "moral insanity", "moral idiocy"," and "moral imbecility", led to the emerging field of eugenic criminology, which held that crime can be reduced by preventing "feeble-minded" people from reproducing.[6][7]

"Imbecile" as a concrete classification was popularized by psychologist Henry H. Goddard[8] and was used in 1927 by United States Supreme Court Justice Oliver Wendell Holmes, Jr. in his ruling in the forced-sterilization case Buck v. Bell, 274 U.S. 200 (1927).[9]

The concept is closely associated with psychologypsychiatrycriminology, and eugenics. However, the term imbecile quickly passed into vernacular usage as a derogatory term, and fell out of professional use in the 20th century[10] in favor of mental retardation.

In recent decades, the phrases "mental retardation", "mentally retarded", and "retarded" initially used in a medical manner, are regarded as derogatory and politically incorrect much like moronimbecilecretindolt and idiot, formerly used as scientific terms in the early 20th century. On October 5, 2010, President Barack Obama signed Senate Bill 2781, known as "Rosa's Law", which changed references to many Federal employees that referred to "mental retardation" to refer instead to "intellectual disability".[11]

Sat, 07/26/2014 - 20:10 | 5008349 shovelhead
shovelhead's picture

That's retarded.

Sat, 07/26/2014 - 20:16 | 5008361 Escrava Isaura
Escrava Isaura's picture

q99x2,

Are you having a religions experience at this moment?

Sat, 07/26/2014 - 19:52 | 5008313 ableman28
ableman28's picture

An odd commentary here about the origins of World War I and its aftermath.

A little known part of the post WWI history that relates to the hyper inflation of the German Mark, the destruction of the Weimar Republic, and the rise of the Nazi party is worth sharing.

The Weimar government, having lost much of the national industrial base in the Ruhr as a result of the peace treat at Versailles and burdened with huge repayment obligations to the victorious powers argued unsuccessfully to have those reparations reduced.  The major powers, England and France mainly, declined.

Weimar then decided to inflate their currency in order to pay back with cheaper money what they owed.  But the amount they owed was so large and inflation so difficult to control that a runaway train surged through the German economy in the 1920's well before the depression that struck the rest of the world, destroying Germany.  

Whether England and France were "right" to persist in a vindictive effort to hold the Germans to a reparations schedule they couldn't easily manage is hard to know judge at this point.  But the reality is that this policy was a causal event in the rise of the Nazi party and the second great war of the 20th century.

Its always about money and power.  When you think its about something else, its about money and power.  Except when its about religion, the true mass insanity.

Sat, 07/26/2014 - 20:01 | 5008335 Escrava Isaura
Escrava Isaura's picture

ableman28,

Please, keep it as stupid as it can possible be....

Don't try to introduce logic and facts.

Sat, 07/26/2014 - 20:51 | 5008434 shovelhead
shovelhead's picture

I'm still waiting for the 'little known part worth sharing'.

You pretty much got the high school summary covered.

If it's the money and power part, I'm sorely disappointed.

Sat, 07/26/2014 - 20:59 | 5008448 JR
JR's picture

Yes, it's all about money and power. And if Americans want it to be different they have to end the Fed. Because this private banking entity is able to create as much fiat currency as it chooses to be used for its wars of conquest and the purchase of heads of state, parliaments and legislatures around the world to make it possible.

Monarchies in the 18th century could only create wars that they could afford and they needed the backing of their subjects. The Fed needs neither.

In that the “build-up for European war [WWII] both before and after 1933 was in great part due to Wall Street financial assistance in the 1920s to create the German cartel system,” Anthony C. Sutton concludes, “we now have to consider and debate whether this New York-based elitist Establishment is a subversive force operating with deliberation and knowledge to suppress the Constitution and a free society.”

Said Sutton: “The financial elite knowingly and with premeditation assisted the Bolshevik Revolution of 1917 in concert with German bankers. After profiting handsomely from the German hyper-inflationary distress of 1923, and planning to place the German reparations burden onto the backs of American investors, Wall Street found it had brought about the 1929 financial crisis.”

Here are just a few corroborating quotes from Sutton’s explosive  expose, Wall Street and the Rise of Hitler  (1976, 1999):

…[The] build-up for European war [WWII] both before and after 1933 was in great part due to Wall Street financial assistance in the 1920s to create the German cartel system, and to technical assistance from well-known American firms ... to build the German Wehrmach.

…[The] interplay of ideas and cooperation between Hjalmar Schacht [Hitler's financial advisor] in Germany and, through Owen Young, the J. P. Morgan interests in New York, was only one facet of a vast and ambitious system of cooperation and international alliance for world control. As described by Carroll Quigley, this system was "... nothing less than to create a world system of financial control, in private hands, able to dominate the political system of each country and the economy of the world as a whole." 

... The contribution made by American capitalism to German war preparations before 1940 can only be described as phenomenal. … Wall Street establishment financiers ... directed the activities of American I.G., the I.G. Farben affiliate in the United States promoting Nazi propaganda. 

The board of American I.G. had three directors from the Federal Reserve Bank of New York, the most influential of the various Federal Reserve Banks. American I.G. also had interlocks with Standard Oil of New Jersey, Ford Motor Company, Bank of Manhattan (later to become the Chase Manhattan), and A.E.G. (German General Electric). Second, three members of the board of this American I.G. were found guilty at Nuremburg War Crimes Trials. These were the German, not the American, members. Among these Germans was Max Ligner, director of the I.G. Farben N. W. 7 office in Berlin, i.e., the Nazi pre-war intelligence office. If the directors of a corporation are collectively responsible for the activities of the corporation, then the American directors should also have been placed on trial at Nuremburg, along with the German directors - that is, if the purpose of the trials was to determine war guilt. Of course, if the purpose of the trials had been to divert attention away from the U.S. involvement in Hitler's rise to power, they succeeded very well in such an objective.

http://www.thirdworldtraveler.com/Fascism/Wall_Street_Rise_Hitler.html

Sat, 07/26/2014 - 23:25 | 5008780 michelp
michelp's picture

In the end, we'll all have to come to terms with running the economy and other systems on a cooperative model.

However, the progress made toward that goal is still negative.

It will take too long to convert for me to still be here to witness this revolution implemented.

m.

Sun, 07/27/2014 - 05:13 | 5009139 piratepiet
piratepiet's picture

"Wall Street establishment financiers ... directed the activities of American I.G., the I.G. Farben affiliate in the United States promoting Nazi propaganda."

 

About these so-called establishment financiers : Where they jewish ? 

If not, were they really Wall street establishment ?

If they were jewish, would they promote Nazi propaganda ?      

Your account defies logic.

The truth has a certain logic, and I do not find it here.

 

Sun, 07/27/2014 - 07:22 | 5009212 BruntFCA
BruntFCA's picture

Nice post, however, its Almost as if it was written by a niave American of the Aristocratic class. A few points.

The US also helped finance the Boleshvick revolution. In addition, there are many New York Times articles asking international jewrey or Zionism to finance the poor Bolshevicks.

The US also helped construct many of the best factories of the Soviet Union.

The US indeed also funded Hitler.

The US also funded Saddam Hussein.

There seems to be a pattern, the US first funds who it seeks to destory? Just an observation.

I've read the whole of Tragedy and Truth, written by a blinded American Aristocrat. The quote about finance you refer to has been taken out of context. He stated that Finance capitalism would be replaced by corporate capitalism (this seemed to be the case in the 1960s). He has been proved completely wrong; currently unlimited leveraged finance capital is crowding out any real form of investment.

As for Germany needing "technical assistance" from the US is absurd. It was the US who needed technical assistance to create its Apollo program from non other than Von Braun, a German rocket scientist. It was Germany that created the first operation Jet Fighter aircraft etc etc. In the world of Physics we have the Hiesenberg uncertainty principle.

You seem to forget (or not know) that up to 1918 the Language of Physics was German. Einstein's (a Genius of course) field equations were first published by a German Mathematician, Einstein had the vision and ideas, but often he could not formulate them adequetly in a mathematical manner. Due to how unpopular Germany became after both world wars, German contributions have often been ignored or conveniently airbrushed away.

As for the Neurenburg trials how can I take your post seriously when you hold these up as some sort of Paragon of justice? The Soviets clearly forged so called "confessions", typed out in Russian with typed signatures. For example , the Katyen forest massacre of Poles (carried out by the NKVD) was blamed on Germany.

The British policy was of deliberate mass bombing of civilian cities to cause massive casualties (no war crimes here). The US re-designated German POW as DEFs (Disarmed Enemy Forces) so that the Geneva convention would not apply, it could then also deny the Red Cross access to the prisoners (something which even Germany did not do). Re-defining it's crimes through legalisms seems to be an American Past time.

Manifest Destiny (same as German Liebensraum). Ethnicaly cleanse Native Americans.

Human Shields (gotta love that one...blame the victim for their own deaths).

In a nutshell (to use an Americanism), the Anglo-American establishment are a bunch of disingenuous shits.

The entire history of WW2 is a sordid mess, and there are a lot more evil parties than merely the Nazis or their collaborators.

Sun, 07/27/2014 - 07:36 | 5009229 piratepiet
piratepiet's picture

"The US indeed also funded Hitler"

Could you please substantiate that statement ?

Sun, 07/27/2014 - 00:03 | 5008840 NickVegas
NickVegas's picture

When you think it about religion, it's about money and power. Fixed that one for ya.

Sun, 07/27/2014 - 13:07 | 5009821 AnAnonymous
AnAnonymous's picture

he Weimar government, having lost much of the national industrial base in the Ruhr as a result of the peace treat at Versailles and burdened with huge repayment obligations to the victorious powers argued unsuccessfully to have those reparations reduced. The major powers, England and France mainly, declined.
____________________________________________________________

They so unsuccessfully argued over that:
-before the signing of the treaty, the evaluation of the reparations were halfed by two.
-by the 1930s, the debt was already history. Most of it was already forgotten in the middle of the 1920s

Contrary to the 'american' propaganda, the omitted bit of history is not that Germany was charged with a debt burden, but that Germany was discharged from its debt burden.

It is part of the 'american' mythology, the way they depict themselves as thriving without means.

'American' propaganda: A heavily debt crippled Germany managed to build their war machine.

Reality: A debt discharged Germany, pumped with US capital, given many free ways on the peace treaty, managed to build their war machine.

Yes, yes, one version is much less sexy for 'americans'. Sexy propaganda, Blair invented nothing. He is just a traditional 'american' politician.

Sat, 07/26/2014 - 20:14 | 5008359 esum
esum's picture

who is forcing CAPITALISM on CHINA...... russia dn they know that central planning DOES NOT WORK

Hilary, Obama, Jarrett, Holder and the Black congressional caucus got their religion in the 60's.... and maintain their beliefs despite TOTAL FAILURE OF COMMUNISM AND SOCIALSIM WORLDWIDE.... socialism is a steady economic death.... it works for awhile but is unsustainable...  

look at the ussa gov efforts to even produce a WEBSITE...... it is difficult to fail but they FAIL

arrogant, effeminate, sweaty palms, teeth grinding hypocrites who ENRICH THEMSELVES AT THE EXPENSE OF stupid people and useful idiots... and crony capitalism...

TAX INVERSIONS... who wrote the TAX CODE??? Corporate officers have a fiduciary responsibilty to shareholders and would be negligent NOT TO TAKE ADVANTAGE OF TAX AVOIDANCE... 

 

Sat, 07/26/2014 - 20:55 | 5008441 barroter
barroter's picture

Seems active money managers upset they can't FEE the shit out of clients who moved onto index funds. 

Sat, 07/26/2014 - 22:35 | 5008672 csmith
csmith's picture

Indexes win because they are efficient for transactions and fees. They lose when momentum takes large caps to extremes, as in 1998-2000. They win for individual investors when those investors simply "set it and forget it" rather than practicing the typical buy high sell low.

Sun, 07/27/2014 - 00:21 | 5008882 slightlyskeptical
slightlyskeptical's picture

The Indexes are formed as a proxy for the underlying economies they are based upon. Indexes add/drop stocks all the time. The whole theme against active managers is false in my opinion. The majority of funds I have ever owned have outperformed their base indices for and mid-long timefame.

I do use index funds in taxable accounts only, as they are much more predicatble on a cap gains basis and on that basis alone will outperform managed funds in a axable account.  Index funds are not the be choice for tax deferred accounts. Take thend dividends and cap gains in cash and the reallocate. Helps you take the money out the funds doing the best (they will pay out the most) and then reallocate to the worser performers.

Sun, 07/27/2014 - 00:31 | 5008905 reTARD
reTARD's picture

Indexation is not really about supply/demand dynamics as it is about fiat inflation. Fiat inflation distorts everything and the overall trend of all markets priced in fiat is a long-term uptrend.

Sun, 07/27/2014 - 00:38 | 5008926 cape_royds
cape_royds's picture

What is it with people not understanding what the term "socialism" means?

It's not all that complicated.

Socialism means that control of the means of the production is distributed among those who work those means of production.

Socialism has nothing to do with "freeloading." Socialism is all about a workers' state, NOT about a welfare state.

On the other hand, bourgeois rentiers love nothing more than freeloading. Freeloading is the desired end state to which they bend their every waking effort.

Sun, 07/27/2014 - 07:57 | 5009259 smacker
smacker's picture

"Socialism means that control of the means of the production is distributed among those who work those means of production."

Actually, that was more akin to one of the extremes of socialism: Communism.

Western democratic socialism aims for a utopian society where everything is controlled by The State and is sometimes referred to as "statism". Big Government, prescriptive laws/regs (even dictating what you can/can't eat/drink), high taxation to pay for monuments to socialism, corruption and incompetence eventually leading to either the Communist model of the almighty State or Fascist model of the almighty corporate sector. There isn't a lot of difference between them. In both cases The State pulls the levers behind the scenes. Both models eventually have to employ jackboots to enforce "fairness" "justice" and "equality" when it all falls down.

Sun, 07/27/2014 - 11:06 | 5009540 damicol
damicol's picture

Here we know the meaning of the word socialism..

 It is the most filthy degenerate evil  fucking  creed on the Planet.

 A fucking cannibalistic child raping killing and eating fried in butter cult has more morals that the fucking filthy socialist scum.

How do I know,, because I see a fucking faggot, a cock sucker, a cock jockey from Chicago bathhouses, and a fucking whore  stretching his man cunt at every opportunity,a fucking parasitic  piece of black fucking Kenyan monkey that lives in the White House, and that piece of shit is a fucking socialist.

A motherfucking evil cunt that should go the way of all socialist scum.

Blow the fuckers up.

Sun, 07/27/2014 - 04:20 | 5009118 BruntFCA
BruntFCA's picture

What he said about momentum and mis-allocation of capital is true. However, people are freaking out over his missuse of the word socialism.

One definition of socialism is to put the means of production in the hands of the people; hard to believe I know. It's best to try to avoid terms like socialims these days, they have gone hyperbolic and can mean totally different things to different people.

Sun, 07/27/2014 - 06:42 | 5009192 Raoul_Luke
Raoul_Luke's picture

If active managers had a better track record for adding value that exceeds their fees this argument would hold more water.  What is really egregious is when active managers become closet indexers because they lack the ability to generate a consistent record of out performance.

And in a market driven almost entirely by HFT hot money flows, I'm not sure the index investor is the most appropriate money manager boogy man...

Sun, 07/27/2014 - 09:20 | 5009381 swmnguy
swmnguy's picture

The US political lexicon has been carefully and very effectively rendered meaningless.  "Socialism" and "Communism" in common usage mean "Things I Don't LIke, where people I don't like get things I don't think they deserve."  Interestingly, after misuse of the term "Fascist" by hippies who were angry at high school gym teachers who told them to get haircuts, Americans don't have the same negative reaction to the word "Fascist" as they do to "Socialist" or "Communist."

Heck, we don't even have decent definitions of "Liberal," "Conservative," or "Progressive" anymore.  In textbook terms, nearly every politician in America is a Liberal.  The people who call themselves "Conservative" are among the least Conservative, in terms of what the word actually means.

I don't particularly care what people call themselves, but it becomes impossible to have a coherent conversation when everyone has his own definition of what the words mean.  And make no mistake; this is intentional.  When people can't even define the things they see in front of them, they can't begin to do anything about it.

Sun, 07/27/2014 - 09:23 | 5009388 AnAnonymous
AnAnonymous's picture

In a true capitalist....
-----------------------------

'Americans' covering their asses... Until their fantasy not meant to be true does not turn true, there wont be true this or that.

'Americans' unable to face the reality of the world they've shaped, unable to step in and stay that the world is the result of their actions.

'Always' trying to find shelter in fantasy and refusing to examine the world at hand.

That is the face of 'americanism'.

And this 'american' guy thinks he deserves every single cent he makes as he is an 'american'.

Sun, 07/27/2014 - 09:37 | 5009409 nmewn
nmewn's picture

Mao Squatting Tiger regurgitates another hairball:

"Americans' unable to face the reality of the world they've shaped, unable to step in and stay that the world is the result of their actions."

You are saying all things bad are American, so who does the good or is there any?

Sun, 07/27/2014 - 13:11 | 5009832 AnAnonymous
AnAnonymous's picture

The 'american' thing...

How a simple sentence "the world is the result of their actions" is turned into "all things bad are American".

The result includes everything.

Sun, 07/27/2014 - 20:54 | 5011111 TheFourthStooge-ing
TheFourthStooge-ing's picture

Dude, come on, what the fuck is this supposed to mean?

Until their fantasy not meant to be true does not turn true, there wont be true this or that.

Seriously WTF? Usually you seem to be trying to make some sort of point, and I try to follow along as best I can. This, though, what is it saying? Is there a point?

Look, I know english isn't your native language, and that's fine. It is incumbent upon a native speaker to make a genuine effort to understand those with a limited ability to express themselves in a given language.

You usually express yourself well enough to be understood. The rest of your post consists of the often seen "fantasy of the 'american' world" and "this 'american' guy thinks he deserves every single cent he makes" canards, both of which are standard songs from your repertoire.

The sentence above, though, intentionally or not, is an instant classic of AnAnonymystical offuscation.

Sun, 07/27/2014 - 09:30 | 5009394 swmnguy
swmnguy's picture

Obviously the author has a vested interest in active management.  People don't use index funds because they want the proletariat to seize the means of production and distribute resources from each according to his ability and to each according to his need.  They do so because they see that, when figuring in management costs, they can do as well or better on average by merely covering the board.  In markets as nakedly manipulated as the ones we see today, that's an attractive option.

If the actively managed funds showed a consistently better track record of returns, after accounting for fees, and people could accurately identify risks, we wouldn't have index funds.

Until a couple decades ago, very few people had any contact with equities markets.  They had pensions.  Their employers hired managers to invest in the very long term, to cover pension obligations.  There has been a very well-executed campaign to get rid of that system.  So now all kinds of people who have no business being in the markets are forced there.  A great many professional investors only make a living off of fees; their investment returns wouldn't keep them in business.  An hourly employee with a 401k is now responsible for getting results that even professionals can't rely on.  They're chum in the water.  That was the entire point of the move to dump pensions and put everyone into the equities markets. And, as expected, once the social need served by pensions was abandoned, the bond markets become available for massive manipulation and looting, which is at the heart of the shenanigans we've seen for the past 25 years.

But to this author, when an unqualified non-professional is in a position of having to safeguard his own wealth for the future, without knowledge and expertise, in an environment of predation and asymmetric information, and takes the easiest way out; that's Socialism.

Whatever.

Do NOT follow this link or you will be banned from the site!