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Toto deVeer

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Posts posted by Toto deVeer

  1. I didn't intend to get into a debate about limited liability, nor cooperatives in this thread, so I will keep this short.

    Firstly, you can get insurance against injury claims.

    Secondly, why should the state shield businessmen, if there is a large claim? The claimant will go without, even though they have been judged to have a valid claim.

    Regardless, limited liability is far more likely to be used as a shield for the owners to save their own houses, cars etc, should the business go belly up. I see no reason why this should be the default position - why give businessmen special exceptions? We're all just people.

    As I said, I am not concerned with the state's interpretation on what counts as a cooperative. A basic description of a cooperative, is where the workers are also shareholders.

    Agreed that the subjects of liability and various business forms could quickly descend into something quite tedious.

    I'll just note that you make a number of valid points. But I don't view these things as the state shielding people from liability. The state permits its citizens, any citizen (or any person - one could say - without discrimination) to pool their resources and form a new legal entity that has certain legal standing. In return for this the new entity must meet strict rules - for example it must be held solvent, a going concern - or the persons operating this company could potentially be subject to criminal prosecution if they continue to engage in transactions (when it is not a going concern). For small businesses the guideline for 'going concern' is when the net current asset value goes negative (although it is not exactly this clear - there are exceptions).

    You can call the persons so forming this new legal entity 'businessmen' but any person can create one of these entities. In the UK this can be done for less cost than a decent meal at a local restaurant. Hardly restrictive for anyone. So I do not see that there is any unfair advantage.

    There is a difference between theory and reality. Banks, for example, simply will not allow the limitation of liability to be of any use for a starting business. They will require collateral in the form of pledges to personal assets of the business owners where loans are issued. This reality is at variance with your assertion that business persons are in some way 'shielded'. In this case the bank is shielded, not the business owner. So there are few, if any special exceptions, in reality.

    A business entity, in an economic sense, is defined by its net current asset value. Until this gets sufficiently large, and has a history, there will be no treatment of it as an established entity, in reality. All other matters otherwise become highly theoretical.

  2. I tend to agree.

    Apart from the last "if they are smart" bit. Which they won't be. They will stick their heads in the sand and hope the whole thing goes away. It won't of course which will lead to a draconian step change. In many ways it is a no win situation for them. If they raise rates slowly proactively they will be blamed for unneccesarily tanking the economy. If they raise rates rapidly in response to a crisis then they will be blamed for tanking the economy. The best thing to do from their perspective is to let things stagger on as they are and hope that nothing comes along to spoil the party. At least if a big outside event comes along they can try the old "it started in America/Europe" line and hope the public buy it.

    Recent history will support your conclusion - unfortunately this is a strong possibility. There is also the possibility that the City will whisper in the ear of our political leaders with an ultimatum, however. If the wheels come off the trolley the City will be one of the biggest losers...

  3. Where there are high risks and liabilities need to be limited, it can be expressly written into contracts. There is no need for the state to shield individuals, especially not by default. EDIT: LL insurance can also be provided by a third party insurer, with the premium reflecting the previous track record etc.

    The benefit of this, is that limited liability is the exception. If you're honest and determined to see a project through, why would you need to shirk your contractual responsibilities? Indeed, would it not ring alarm bells when a company started asking for limited liability, without good reason? Providing unlimited liability then becomes a selling point - a personal guarantee (by the shareholders), as it were.

    If someone slips on the front doorstep of the office on a rainy day and cracks their skull, investors don't want to assume unlimited liability when 'Lawsuits R Us' wins a record breaking settlement (on a contingency basis)...

    Statutory law clearly defines liability -- commercial contracts, by contrast, are nothing more than a starting point of court argument -- therefore is not a statutory limitation but merely an attempt to limit liability. This introduces more investor uncertainty - in the latter case.

    Plus contract liability limitations must be crafted on a case by case basis - whereas statutory limitation is the same for all.

    These aspects have nothing to do with honesty or dishonesty or seeing a project through. Simply prudence.

    Regarding the tax structure, I'm not an expert here and I'll gladly take your word on it. However, when I discuss cooperatives, I'm talking about a company where every worker is also a shareholder - nothing more, nothing less.

    The nuances of various different (arbitrary) state rules/regulations may also discourage cooperatives forming, but I'm more concerned with the broader terms. That's not to say the nuances aren't important in reality - of course the are - but we're talking about cooperatives in a broad sense here, no?

    There is no reason why a share-based company cannot have workers as shareholders. Certainly I have worked for employee-owned limited companies in the past.

    Cooperatives have a much more stringent governance structure established by statutory legislation - governance and member participation is enshrined in law - more so than share based companies.

  4. I would assert that limited liability is very important when comparing cooperatives to non-cooperatives.

    If you are a company owner and have your liability (risk) limited, what benefit is there of distributing it to others (i.e. as a cooperative)?

    With LL, if you win, you get to keep all the spoils, but if you lose, you are protected from the losses. If you are exposed to the entire risk, you are much more likely to spread the risk and accept smaller gains - that is, you will be more likely to form a cooperative (of shareholders).

    I think you are looking at this too simplistically. There are contributions agreements in all forms of Cooperatives. Members are vested in it - regardless of the liability issues. Recall that the concept of limited liability arose from certain high risk shipping undertakings - that would not have found investment otherwise. Nonetheless those investors still have 'skin in the game' in any case - whether limited or unlimited.

    From a functional perspective, for share based capital structures - dividends are taxed at source - effectively the net income is taxed first, then the dividends are taxed next, and ultimately capital gains on shares are taxed. However a Cooperative is not a capital based structure - net income is distributed (or reserved). Generally most jurisdictions don't tax distributions. Therefore income is only taxed once - not twice.

    These are some of the issues, among others, in the establishment of a limited liability Cooperative or a Limited Liability Company. It could be beneficial for joint venture arrangements, collaborations between small enterprises, or fair trading vehicles - like with tea or coffee production.

  5. Here's my 2c.

    The BOE can buy up bonds indefinitely to keep interest rates at zero. Therefore there should never be a bond collapse.

    However, there will be a currency collapse. You can't have it both ways. Thus all debts will be repaid, but the currency of payment may become worthless.

    At some point the currency collapse (or hopefully risk-of collapse) is going to trigger some effort by Whitehall and the BOE to do something with interest rates.

    When it gets to this stage - fighting currency collapse by increasing interest rates and debt levels - its going to be a white knuckle roller-coaster ride...and the cars could fly off the tracks...

    In my opinion, if they are smart, they will pre-empt this risk by gently nudging rates up just a little, from time to time - staying ahead of everybody else - to play the 'safe-harbour' card...

  6. Oh, absolutely. I think cooperatives and mutuals are a great way to organise - they can be far more democratic and responsive than centralised state services.

    Cooperatives also distribute the risk throughout the organisation, as everyone is a share holder, rather than just the bosses. Ofc, this is only a useful attribute, if liability to the bosses isn't limited though.

    I don't think that the issue of limited or unlimited is so important. Cooperatives around the world come under strict governance and share guidelines - this is in fact what defines them as being apart from other business forms - shared, distributed and representative decision-making.

    The issue of limited and unlimited is more to do with the type or object of the enterprise - the risk involved. High risk enterprises (such as certain insurance activities, or the commercialization of research) might not be undertaken, otherwise.

    However, this wasn't the point I was focusing on.

    My point is that competition will limit profits of resource extraction, as long as competition exists - there will be enough to pay those involved (or they wouldn't do it), but its unlikely for there to be much more.

    In some cases though, monopolising a location may mean that higher profits can be taken (due to quality of oil field, coal seam etc). If competitors can't access the same field, then the driller/miner could essentially extract rent from the location monopoly, in addition to profits. Whether this is frequently the case or not, I do not know, but there is potential for exploitation here - that was my point (I hope that makes sense - I realise it is a bit convoluted!).

    Whether the above is worth worry about or not, is beyond my knowledge. I just wanted to demonstrate that it had been considered and that there could potentially be rent seeking behaviour, due to a lack of direct competition (due to location monopoly).

    Yes that is a possibility. Point taken.

  7. Splitting hairs? I'd say the implications are quite different in some cases, particularly for non-fixed natural resources.

    What I am saying is that resources can be extracted with cooperative types of business structures. This is, in fact, the basis of some of the world's most successful businesses with shared responsibility and shared reward. Coops were introduced originally for collective benefit of farming. Now you have such organizations as Fonterra or Mondragon - and most of the safest banking institutions are Cooperatives. Currently very big in Banking, Forestry, Fisheries, Agriculture, Industrial production.

    Thus proving that capitalism, resource utilization and shared benefit can coexist - without concentration of ownership.

  8. How can something be owned by everyone, when no one has laboured to alter its state? Someone declaring that some coal underground is 'theirs' is clearly nonsense, but declaring that we all own it is incorrect too.

    Splitting hairs.

    Cooperative businesses. Same model as Barcelona FC - arguably the world's most successful football club.

  9. A certain 'body' of people did it deliberately in my view

    The Sasooon family:

    '...started as 'Opium traders from Bagdad... ...in 1832... ...expanded from Bagdad to Bombay... ...and thereafter into China, Japan and the entire Orient ...'. The Sasoons were considered more influential, more wealthy and more secretive that the Rothschilds (formerly Bauer in Germany).

    Descendants of the Sassoons are known as Soongs in China - prior to the revolution they ran the largest bank and the Central bank in China.

    The two Dynasties (Sassoons and Rothschilds) were joined by intermarriage in 1881.

    --Empire of the City, EC Knuth, 1945 (Reprinted 2006).

    Guess who David Cameron's key advisor is today?

    Lord Sassoon.

  10. You didn't answer the question though- which door would you walk through in order to sell more phones- the one the single billionaire sat behind or the one a thousand average people sat behind?

    It seems obvious that no matter how much money the billionaire might have he is unlikely to need a thousand mobile phones- or even a few hundred.

    So the idea that if we populate the globe with a relatively small number of mega rich people this will create sufficient demand to drive a global economy in which billions of men and machines churn out vast quantities of goods and services is absurd.

    I saw an old photograph once of a Victorian big game hunter standing on top of a stack of dead tigers he had shot. He was proud of his achievement in slaughtering these beasts and had the photo taken to commemorate the event.- yet to our eyes the spectacle is grotesque and sickening.

    Why the difference? Partly it's a cultural shift regarding the way we feel about the natural world- but what really separates us from that victorian hunter is that in his time the idea that nature had limits was unknown- nature to the victorian mindset was an infinite resource that could never be exhausted- there would always be more tigers, no matter how many were shot for sport.

    What has this to do with economics? Well I would argue that supply side economics has precisely this mind set in relation to demand- that demand is an infinite resource that can never be exhausted- there will always be demand no matter how many jobs are automated or outsourced or how unequal the distribution of wealth in an economy might become.

    For this reason they believe that the only limit on prosperity is the availability of capital for investment and the freedom to put this capital to work, which in turn leads them to conclude that the source of wealth creation is the capital holder.

    In fact- as the video argues- the source of wealth creation is the demand that drives sales and profits- demand that is derived from jobs and the wages they deliver to the wider population

    Macro economics observes the whirlpool in the stream and concludes that the whirlpool is the source of the streams motion- failing to grasp that the whirlpool is not the cause of that motion, but is in fact an effect of that motion. Capital does not create wealth- it is the surplus by product of wealth creation- what creates wealth is the process by which demand is first recycled as wages then back into further demand.

    Any economic theory that has embedded in it the notion of an infinite resource is to be treated with extreme caution.

    What your trying to say is that if people can't earn enough to buy things, then they don't get bought, no?

    Here's what's happened during the last 40 years, as I see it:

    1 - Salaries started stagnating in the late 1970's. To keep demand going, the wife/partner entered the workforce - to boost household income.

    2 - But salaries are still stagnant. So the extra worker only had a temporary effect. So household income stagnated.

    3 - Now there must be a way to keep demand going - so asset prices were bubbled - this created another temporary boost to household wealth.

    4 - But then this stagnated - and almost collapsed - in 2008.

    So here we are. Where is demand coming from now?

  11. He's only lending cos he knows chance of whole country going bust is zero

    - cos EU just bail it out with stolen taxpayer trillians.

    So what risk is he bull-shitting about?

    He's sucking the wealth out of the countries thru the interest rates charged on the loans.

    A one-way casino game

    None of us puny mortals is intelligent enough to question the Gods Dimon and Blankfein :lol:

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