DiscussWorldIssues - Socio-Economic Religion and Political Uncensored Debate - View Single Post - Is our current financial system the product of our tax laws?

**Gulauur** · 02-01-2011, 07:25 PM

I don't think I have a clear picture here, although I learning.

A question I now have is what percentage of the market are:

Institutions
Corporations
Individuals
Pensions/etc
Countries

If Individuals went from 90% to 30%, other portions would have to increase, a lot. If it isn't mostly pensions, what is it?

Obviously Corporations, Institutions, and Countries would all require managers (either in house or in a special firm) and wouldn't be replaceable. I guess my expectation is that a lot of the market is still really owned (through intermediaries) by people, and not by independent institutions. The larger the market there is for financial services, the greater the competition/innovation/cost in that sector and so on. There have been statistics I have seen showing an increase in the amount of money going to financial services. A large decrease in the ownership of stock by individuals, and increase by institutions/etc which need management would increase the share of gdp going towards financial services. Also very wealthy people will want managers (in order to have reasonable diversification).

If I am wrong, and we are seeing a large increase in the ownership of capital by institutions/etc as a share of total ownership in the last 50 years, then this would have profound social implications which I don't completely understand.

There are current parts of the tax policies (the capital gains tax mentioned in this thread and the exemption for 401k/etc) which do have distortionary effects. It isn't clear to me which form the distortion takes. I know many people who seem to have long term savings which are primarily of exempted types.

The costs of active management are combined with the costs of inflation and capital gains taxes when determining whether to save or not (once the necessities have been acquired, which is actually a large part of most people's income).

I am not sure what to count social security as (it should definitely be counted in individual saving rates). It is also a pension of a sort, but isn't invested in the market... is rather given to the country in the expectation that the country will give back later in life.

Jon

02-01-2011, 07:25 PM	#6
Gulauur Join Date Oct 2005 Posts 595 Senior Member	I don't think I have a clear picture here, although I learning. A question I now have is what percentage of the market are: Institutions Corporations Individuals Pensions/etc Countries If Individuals went from 90% to 30%, other portions would have to increase, a lot. If it isn't mostly pensions, what is it? Obviously Corporations, Institutions, and Countries would all require managers (either in house or in a special firm) and wouldn't be replaceable. I guess my expectation is that a lot of the market is still really owned (through intermediaries) by people, and not by independent institutions. The larger the market there is for financial services, the greater the competition/innovation/cost in that sector and so on. There have been statistics I have seen showing an increase in the amount of money going to financial services. A large decrease in the ownership of stock by individuals, and increase by institutions/etc which need management would increase the share of gdp going towards financial services. Also very wealthy people will want managers (in order to have reasonable diversification). If I am wrong, and we are seeing a large increase in the ownership of capital by institutions/etc as a share of total ownership in the last 50 years, then this would have profound social implications which I don't completely understand. There are current parts of the tax policies (the capital gains tax mentioned in this thread and the exemption for 401k/etc) which do have distortionary effects. It isn't clear to me which form the distortion takes. I know many people who seem to have long term savings which are primarily of exempted types. The costs of active management are combined with the costs of inflation and capital gains taxes when determining whether to save or not (once the necessities have been acquired, which is actually a large part of most people's income). I am not sure what to count social security as (it should definitely be counted in individual saving rates). It is also a pension of a sort, but isn't invested in the market... is rather given to the country in the expectation that the country will give back later in life. Jon
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