Debate Magazine

Please Sir, May We Have Some More?

Posted on the 22 January 2016 by Markwadsworth @Mark_Wadsworth

From City AM:
Finally some good news: the FTSE 100 got off to a flying start this morning, gaining up to 1.8 per cent in early trading as dovish remarks from Mario Draghi sent investors' spirits soaring.
Global bourses surged, with Japanese stocks roaring out of bear market territory to make their second-biggest one-day gain in five years.

I can see why governments want unemployment to be low and the economy to be growing, and fair play if they interfere to try and achieve those, but why on earth do they want to prop up share prices? It's just as mad as propping up land prices (although considerably less damaging to the economy). Share prices are not fundamental or important in themselves; what is important is total output, total employment and of course the underlying profitability of businesses.
Which is one more argument for having deposit funded corporations instead of companies with quoted shares - DFC's don't have a share price to worry about. To the extent that the government interferes in the economy, at least it would be focusing on what matters - output, employment and profits. And seeing as output = wages plus profits, really all it needs to worry about is 'output', so an obvious first step is reducing taxes on outputs (i.e. VAT).

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