The Shock of Sweden's Housing Market Is Hitting the Country's Currency

Re:The Shock of Sweden's Housing Market Is Hitting the Count... by opportune on Wednesday November 15, 2017 @04:48PM (#15708169)

Very good point. My pet theory is that the emphasis on asset-ownership as a means of retirement is what is decreasing the velocity of money. For example, let's say we had a system where instead of purchasing a home/stocks/bonds to save for retirement, you could instead pay the government $X which essentially goes toward an annuity with payout determined by the age at which you retire. The government could just immediately spend that money - perhaps on other retirements - and your actual annuity is just an accounting entry. So this is similar to social security, except you can pay more if you want to.

The emphasis on assets for retirement locks a lot of money up in an unproductive musical-chairs of asset transfership. For example let's say I have a pay-day and want to spend $100 on buying stock. When I buy that stock I'm purchasing it directly from someone else who now has $100 instead of the stock. They can spend that money on goods and services, but in my opinion there is a far greater chance that they will reinvest that money in some other asset. If the actual assets in the market don't change, I think you can say that my investment increased the total sum of costs of all assets. I'm not 100% sure this is solid logic but it's some rough reasoning.

The problem is that at any given time more people are buying new assets instead of selling them off. This is because you can make money on purchased assets through rentiership (dividends, renting, or collateral for a leveraged investment that pays dividends/can be rented), and also because people are cautious and save more than they need, since asset prices are unstable.

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Re:The Shock of Sweden's Housing Market Is Hitting the Count... by littlestymaar on Wednesday November 15, 2017 @05:42PM (#15708634)

That's an interesting point, and easily challenged since my country (France) is actually doing what you suggest. And as a matter of fact, retirement here is part of the social security system (La sécurité sociale). I'll check if we see the same kind of slowdown of money during the past decades here.

I have two personal pet theories (is that really a common idiom in english ? I like it !) on that topic.

1. since we now focus on low inflation, people have little incentive to spend/invest their money, they can just hoard cash for a long time with no risk of losing money.

2. The low imposition rate since Reagan accelerate the concentration of capital, and rich people buy assets with their money, not consuption goods.

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Re:The Shock of Sweden's Housing Market Is Hitting the Count... by opportune on Wednesday November 15, 2017 @06:06PM (#15708875)

One thing I'd worry about is that this kind of pension may only work in a closed system. People not living in France may still purchase French assets for investment, just as they continue to purchase international assets for investment, which will still drive an increase in demand. That could incentivize French people to continue investment, in the absence of strict capital controls.

And yes, it is somewhat common! I think your second point is definitely part of the problem. As to your first, I think that looking at inflation in these terms requires looking at interest rates as well. When both inflation and interest rates are low, hoarding cash is highly incentivized. If inflation is low and interest is high, there is a large opportunity cost to holding cash rather than collecting interest via a mechanism directly tied to the cash (e.g. a bond). If both inflation and interest are high, it would probably be optimal to invest in assets that won't have their underlying value erode as they do with bonds.

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Re:The Shock of Sweden's Housing Market Is Hitting the Count... by vasilipupkin on Wednesday November 15, 2017 @08:06PM (#15709497)

I'm sorry I think you are confused. When you buy stock, you are providing capital to the company issuing that stock. Yes, even in the secondary market, although indirectly. The company then invests that money productively and the economy grows.

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Re:The Shock of Sweden's Housing Market Is Hitting the Count... by redtexture on Wednesday November 15, 2017 @08:44PM (#15709690)

Ah, no. The moment the company gets money, is when it sells the stock. After that, unless the company sells more stock, or buys and re-sells its stock, it receives zero more capital financing dollars, unless it undertakes other financing activity, such as the sale of bonds.

There is no indirect means to receive money, except for profit, and that it is not related to stock.

Profit is ultimately the primary means for company cash liquidity, held as retained earnings, after the company has survived its initial years of inception and growth.

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Re:The Shock of Sweden's Housing Market Is Hitting the Count... by vasilipupkin on Wednesday November 15, 2017 @09:15PM (#15709814)

Sorry, you are missing the point. A liquid secondary market is what enables the company to go public in the first place. There would be no initial sale of stock without it at all. In addition, liquid secondary market enables the company to incentivize its employees and undertake other financing activities, as well as gives value to its remaining treasury stock.

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Re:The Shock of Sweden's Housing Market Is Hitting the Count... by littlestymaar on Thursday November 16, 2017 @01:11AM (#15710570)

> A liquid secondary market is what enables the company to go public in the first place.

Dividends enable the company to go public. The secondary market makes the stock liquid, which is convenient but not mandatory.

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Re:The Shock of Sweden's Housing Market Is Hitting the Count... by vasilipupkin on Thursday November 16, 2017 @07:04AM (#15712026)

No. Growth companies may not pay dividends for years and still go public. Dividends are paid by private companies too. The only reason to go public is the liquidity

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Re:The Shock of Sweden's Housing Market Is Hitting the Count... by geezerjay on Friday November 17, 2017 @02:16PM (#15725089)

That's not true. A company doesn't manage to sell its shares because of dividends. Dividends may be used to estimate value base on the expectation of returns, but if dividends were relevant or even dictated the share price then stocks of companies that posted negative results would be worth zero. Which they don't.

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