Friday, 21 November 2008

Time For City Whizz Kids to Put On Their Slippers?

Here's a thought: what if it wasn't profitable to own stocks?

"Absurd", did I hear you say ? John Ross doesn't agree,

"....the nominal decline of the Dow after 1929 was 89 per cent although, as overall price deflation was occurring, the decline in real prices was somewhat less. The maximum decline of the Nikkei since its peak at the end of 1989 has been 80.2 per cent - although ... the fall in terms of real prices is again slightly less....... At the close of trading on 20 November the decline of the Dow since its peak in 2007 was 46.7 per cent.

...... it took 25 years after 1929 for the Dow to regain its pre-crash level even in nominal terms. ....shows the performance of the Nikkei after 1989 was even worse than that of the Dow after 1929 - the Nikkei was still registering new lows almost 18 years after the beginning of its decline.

Performance of more minor stock markets, considered historically and for earlier periods, can be worse.

Prices on the French stock market failed even to keep up with inflation for 53 years from 1900-1952. Prices on the German stock market failed to keep up with inflation for 55 years from 1900-1954. Prices on the Japanese stock market, in addition to the recent fall of the Nikkei, failed to keep up with inflation for 51 years from 1900-1950. Prices on the Italian stock market failed to keep up with inflation for 73 years from 1906-1978."

So what would the money men do if it was so much harder to gamble? I mean, clever as Swiftian financial irony might be, there's only so often one can churn out this sort of thing. & - forgive me if I'm wrong - I don't think pension fund managers are famous for their comedic talents anyway.

Even as a non economist, I know the City works via many more financial devices than stocks alone: but surely company ownership is in some vague way pretty basic? So what happens when it is not profitable? Where else does the money go - under a mattress?

And what happens to a country where financial services represents 20% of the economy?

Here's an idea - use the money to make long-term investments in socially beneficial enterprises. Stuff like slippers. As Adrianb points out:

" About 50% of over 85 year olds fall every year; a person dies every hour as a result of a fall; fractured hips cost the NHS £1.7bn every year. A [local authority]scheme to replace worn out slippers was used to screen and provide information to elderly people. "

So let's issue a new pair of slippers to all over 65s four times a year as part of a wider Green programme. Like this one, only bigger. & with slippers.

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