January 26th, 2011
My brother and I met at the VA today. Our health ailments, and the good health care deal we get from the government, led us into a farther ranging discussion of the ailments and health care of our economy. Yes, the economy’s health needs care from its appropriate doctors, too. My brother, Dan, a Ph.D. in biology has a pretty damn good idea. I think it deserves real attention from the economists. Before I get to it, some background:
22 years ago, Dan and his then partner invented a biological remediation system for human waste. It fits within a septic tank and not only wipes out the bad germs (mostly e. Coli), its remediating action spreads out to the property and into what is called the leach field. A failed septic system leaves this part of the homeowners yard a sludgy mess. Appropriately, the device is called The SludgeHammer.
During its first 20 years it has been a constant struggle to keep the company going. As a small businessman, most of his funds have been taken up covering the testing costs of various bureaus at the state, local, and federal levels. In addition, he and his partner are constantly on the go — to Libya, China, England, Nigeria, and Central America — putting their units into the waste systems of oil barges and other large industrial work platforms. Chevron, for one, got serious some years ago about protecting the Nigerian Delta. They use the SludgeHammer exclusively in those operations.
But the company comprises only two field engineers, who are also the business partners, Dan and Buzz, and an office manager along with one inside sales person. It’s nearly impossible for two men in their sixties to travel constantly and at the same time, keep the domestic business as healthy as it should be. They need to hire more people.
Two years ago, Dan and Buzz were heartened by the election of Obama. Aside from all the marvelous change he would be bringing to America and the world, he promised to help small business. So it was a little bit odd when he put all the big bankers into the business policy jobs. It turned out to be worse than just odd, it’s worse than nothing. No small business loans. No small business investment strategy at all. The large corporations are getting fatter and fatter, owning more and more, and actually buying out small businesses for a song. The inventors and entrepreneurs have been sucking hind tit. All the while, the stock market is going great. But jobs are not being created. It’s all about trading now.
Paper trading — actually not even paper. Traders are scoring big with trades that last only a microsecond. A sufficiently well-heeled investor can buy and sell the same stock in less than a second and, through some sleight of rational thought, become a good deal richer. All in the time it takes to cough in the face of his intern.
I asked my brother if, as a small businessman, he could have any wish, what would it be?
“Get rid of the stock market,” he said. I gave him a get real look, then he continued. “Get rid of the trading system as it is currently structured. These bastards are trading lickety-split, but there’s no incentive for them to hold onto their investments. The stock hiccups, they take their profit and bail. The point of the market, old-fashioned as it may sound, is to capitalize a venture that you see as a viable addition to the economy. The designer, the workers, the sales staffs, the entrepreneurs and, yes, even the consumer — these are the people who must benefit to have a market that inspires production.”
With that, Dan outlined his cure. Those who buy and sell stocks in a micro-second, should pay a 99% capital gains tax on their (excuse me while I clear my throat) earnings. Yes, outrageously confiscatory in order to stop this outrageous practice. A day trade, 90%. Sure it’ll piss off the day traders on their laptops, but it should open up a few tables at Peets when these guys get off their asses and find something productive to do. Hold on to your stock for a week, 70%. A month, 60%. Year, 50%. Two years, 35%. Five years, 10%. Ten years or more, zero percent capital gains taxes.
Certainly, this scheme would trigger outrage. The rich don’t even like to pay taxes on their Grey Poupon. But that’s the point. Propose it as it is. Let them scream. Wake the public up to what it is that investment is supposed to do for the economy, for the honest businessman, for the job-seeker.
I said, what would you call this? “Well, it’s based on an asymptotic curve — might as well call it asymptotic trading.”
Sounds good to me. Dan Wickham’s Asymptotic Trading. DWAT.