shares = wages, pensions ?

Discussion in 'Economy' started by Widdekind, Apr 19, 2012.

  1. Widdekind
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    Widdekind Member

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    why not:
    • define corporate "shares" as those securities that pay dividends of $1 (FMV would float from there)
    • pay workers (partly) in "shares", accumulations of which represent (transferable, inheritable) seniority, translating into increasing payments (resembling pensions & IRAs)
    • break down divisive barriers, between "Whites" & "Blues", permitting potentially any reliable employee increasing "ownership" of the business (including voting rights) ("sky-blue shirts for everybody", "from janitor to CEO if they're qualified")
    ever increasingly "Byzantine Labyrinthine" Laws promote increasingly complex securities, to circumvent the same; only lawyers understand the Laws, and only some employees can afford the lawyers ? Logically, "participation & pensions, retirement security & securities", could all be bundled together, into simple financial instruments that "everybody can easily understand" (paraphrasing FDR).
     
  2. DSGE
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    DSGE VIP Member

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    Well you can buy shares with wages. The reason people want wages instead of shares is risk. Conditional on having a job, your income at some point in the future in certain. You can smooth consumption easily. If you're paid with shares, whose price can vary wildly, you're income becomes incredibly uncertain. But if you want to take on that risk, you can just buy shares with your wages.
     
  3. Widdekind
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    Widdekind Member

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    that reflects persistent Speculation, against those assets ? what other assets' value vary with such volatility ? cars ? hair-driers ? canned soup ? sans Speculation, share-prices might not be so volatile
     
  4. inALIENable
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    inALIENable BANNED

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    Meddlers. Why not start your own business and do these things yourself and leave others and their affairs alone. ?
     
  5. DSGE
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    DSGE VIP Member

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    Expectations of their profitability don't vary so wildly. It's not just people gambling that make the price of shares fluctuate, it's the expectation of the profitability of the company (profitability dictates dividends, dividends form the basis for share prices).
     
  6. Widdekind
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    Widdekind Member

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    would you please clarify ?

    share prices reflect expected present value, of future income payments ? if businesses were expected to "last forever", wouldn't dividend-yielding shares have infinite value ?
     
  7. DSGE
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    DSGE VIP Member

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    Yes.

    No, because of present value discounting. Say a share was expected to pay $1 every year forever, starting next year, with a prevailing interest rate of r. What's the present value of the share?

    PV = $1/(1+r) + $1/(1+r)^2 +$1/(1+r)^3.....
    = $1/(1+r)*(1+ 1/(1+r) + 1/(1+r)^2 + 1/(1+r)^3....)
    = $1/(1+r)*1/(1-[1/(1+r]) [geometric series]
    = $1/r

    So even though it gives infinitely many payments, the present value is finite since we discount the payments by (1+r)^n.
     

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