The Dow Jones Industrial Average, “the Dow,” plunged yesterday, causing the usual panic among the gamblers and speculators who think investment consists of rolling the dice and hoping to get in on the ground floor of something that will increase in value, so they sell at a huge profit. Of course, this ignores the true investor who buys something that will generate an adequate return or income regardless of the value of the asset generating the return or income.
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| It's not a myth, but it's not reality, either. |
This raises the question as to what the purpose of the stock market is, what is called “the secondary market.” First off, there is a reason the stock market is called secondary, and the productive economy is called primary. The primary market is concerned with producing marketable goods and services to meet people’s wants and needs. It is primary because it is concerned with the specific purpose and primary reason for having an economy in the first place: the production, distribution, and consumption of marketable goods and services.
The stock market, however, is concerned with buying and selling ownership of presumably productive assets. There is no production or consumption of the goods and services they deal in, only distribution, a service that is itself consumed. The moment the stock market becomes viewed as a primary aspect of an economy instead of a secondhand shop for used ownership, the entire economy gets turned upside down. The cart is put before the horse.
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| Productive activity is what it's all about. |
This is not to say that the stock market is not important. It is, in fact, essential to the functioning of a free market, for how else are you supposed to deal with debt and equity that one person doesn’t want and another one does? There is nothing wrong with having a stock market, but like anything else, there is a proper place for everything. When the stock market goes up and down, that reflects the value of debt and equity that is not being used by people to generate income or control. It is an opinion that may or may not reflect reality.
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| Don't worry. Be productive. |
So long as the stock market is put in its proper place, it is a valuable economic and financial tool. Once it becomes the be all and end all of economic and financial life, then it is a clear sign something is fundamentally wrong with an economy and a financial system.
So, yes, keep an eye on the Dow . . . but keep a closer eye on the ROI and dividend rate of the shares you own, and the interest rate of the debt you hold. True investment is for income and control — what ownership is all about — not for buying and selling productive assets. That’s necessary or desirable at times, of course, but it’s not what it’s all about.
What the economy needs, whether we’re talking local, national, or global, is a shift from speculation and money manipulation to productive activity directed at meeting consumption needs. This is what the Economic Democracy Act is all about, and why it should be adopted as soon as possible.
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