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View Full Version : Stock market as vehicle of sucking wealth from real economy



sandwind
05-26-09, 07:25 AM
2 charts from prof. Ozgura Orhangazi Financialization Shows transfer of wealth from real economy to finanse

"Suggestions to solve the financial crises by basically shutting down most of Wall Street are always shouted down by howls of “How are companies going to raise money?” or “How are people going to invest in companies?”"

Graph shows the percentage of capital expenditures by U.S. non-financial companies that was raised in U.S. financial markets from 1952 to 2006.

http://i124.photobucket.com/albums/p7/NBBooks/NFCequityissuesaspercentCAPEX.jpg

Graph hows that since 1984, new equity issues have been less than capital expenditures by U.S. non-financial companies, except for the three years of 1991 to 1993. In other words, non-financial companies do NOT use the stock market to raise funds for capital improvement programs.

"Wall Street simply is not doing what most people think it’s doing. Nor what most people think it should be doing. Wall Street is not even doing what it says it is doing. Wall Street is pushing a big myth that its services are essential to the functioning of the rest of the economy. But the truth is, as this graph shows, Wall Street does not -- and has not for a very long time -- serve the function of allocating credit in the economy."

http://i124.photobucket.com/albums/p7/NBBooks/NFCequityissuesaspercentCAPEX.jpg



Full version:
http://www.economicpopulist.org/?q=content/debunking-myth-financial-markets#comments

Mango
06-07-09, 01:01 AM
Great article! I've been looking for more information on this since I've seen Michael Hudson drop quick references to the same idea. This gives a fuller explanation, although I could still use more background.