I have been reading and thinking about the word (or, I should say, the concept), “stock.” Specifically, I had a vague impression that the word “stock” as in, “a grocery store keeps a stock of goods”, and the word “stock” as in, “buy stock in a company”, had to be somehow related. I wanted to clarify fully what the connection is. I think I have figured it out.
The word stock as in “a grocery store keeps a stock of goods” is pretty easy to get one’s head around. Whether it’s a grocery store or any other kind of business, their “stock” is fully produced, nonperishable goods that can be stored to sell later. From google, “the merchandise that a shop has on hand.”
The word “stock” as in “buy stock in a company” is not as conceptually easy to get one’s head around. When one person buys “stock,” they are giving money to a fledgling business in exchange for a right to the potential profit of said business later. The investor gives money to the fledgling business in hope that the business will grow and thrive.
That money that the investor has is the key to the link between the two definitions of “stock.” How did the investor get that money? He got it by producing something himself, thus making money. That money was still available to him because he did not waste that money on consumerism but rather saved it. In the same way that a store’s “stock” represents goods they produced but haven’t sold yet, and thus are available for future use; so the money that is used to buy stock represents goods that have been produced but not consumed yet and are thus available for future use.
There is another related concept, the concept of a “stock seed” (terminology borrowed from Ayn Rand). Stock seed is the seed a farmer keeps (i.e. doesn’t eat/consume) so that he can plant next year’s crop. Think of how a potato is grown. A potato is grown by taking a fully formed potato and, instead of eating it, planting it in the ground. It then sprouts and grows more potatoes. The “stock seed” is that portion of a potato crop that a farmer choses not to consume but rather uses to grow more potatoes.
In all three concepts of stock, stock represents already produced goods that is then used to further future sustenance.
In the farm example, how much growth do you think there would be if, instead of being able to grow a crop and keep his potatoes such that he could save some for next season’s crop, another party came in, took 1/3 of the farmer’s potatoes and redistributed them to many potato eaters–claiming that potato eaters make the world go ’round? This is exactly the philosophy of every single federal “bailout” and “economic stimulus” plan.
How big of a crop will the farmer be able to produce next year? What exactly will being given potatoes to consume “stimulate”? Is the answer that those people will perhaps take their potatoes to barter with a tomato grower, thus helping the tomato grower? The same tomato grower who had 1/3 of his crop also taken and restributed?
Taxes, bailouts and supposed economic stimuli cannot create wealth it can only shift it. Different people will have money–that is all that will happen. Nothing gets stimulated. If you want to stimulate, you need stock seed.
This is the whole of those who try to demonize spooooooky “supply side economics,” i.e. the political philosophy that liberating producers, “suppliers” will help all in an economy. Since the philosophy of bailouts does not have a name I will call it “demand side economics,” which is the logical corollary but of course they won’t label themselves as such. Demand side economics is, like in the potato example, nothing except wealth redistribution, i.e. socialism, but cloaked in the name of “economic stimulation.” On a simple level of abstraction, it is completely obvious: people who continue to consume will eventually run out of goods and people who supply will keep the goods stocked. But when you apply it to a national economy, conceptual links break down and somehow people think consumers make the economy chug.
Every time Obama and ilk move to soak the evil, evil rich (read: the producer, the investor, the “farmer”), he moves to ruin this country’s stock seed. How long can it last? It is my fear that we will find out.