Quote: (01-27-2014 03:32 PM)worldwidetraveler Wrote:
Why respond? You made a statement that companies can use bonds to bring in cash. Sure, duh!
Now, can you tell me there will be the same amount of cash available to businesses if they strictly relied on bonds and there was no incentives for people to invest in stocks?
if there is no monetary inflation, thus base assets are always book value less depreciation, then what goes up on the ledger is either goodwill, or increased market share.
Branding, internal processes, value and supply chain management.
The thing that we pay management for.
Bonds always have a nominal face value, to beat that you need a well performing company.
To instill inflation means poor performing companies get rewarded too. it is in noone's best interests to have that.
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I mean, you said it yourself, people have to invest into something otherwise their cash erodes in value. If there was no erosion, there would be no need to invest.
It's called greed. People wil invest because they want more.
Bonds return a coupon, companies return a dividend.
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Now you're trying to tell me they would all invest in bonds and the same amount of cash available to businesses wouldn't change. Got a link to that fact? Besides the fact that the company owes that money back since it is debt.
Erhh, there are very few companies that don't have debt. Companies actually prefer debt because its cheaper than equity. However, lenders insist on equity ratios, thus companies have to go that way at time.
And in regards to paying for equity, in a no inflationary environment, equity would just have to pay a different premium.. in other words, pay the proper price.
Having people be forced to chase equity to hedge against inflation means they are captive, and thus the price paid for equity will probably be lower than it should be.
In other words, inflation becomes a form of welfare for companies.
You point out these types of welfare when asserting rampant systematic welfare is destroying civilisation?
I agree with the premise however, I have found out this more than ever as I now deal with equity raisings in my company.
The game is rigged. It is rigged for asset holders, to the detriment of savers and workers.
Inflation makes people 'pay', when they don't know they are paying.