Eric Schmidt To Sell Up To 42% of Stake In Google 183
derGoldstein writes "AllThingsD reports that Eric Schmidt 'plans to sell up to 3.2 million shares of his class A common stock in the company,' according to an SEC filing. 'The amount is equal to approximately 42.1 percent of his overall stake in Google.'"
Time to haul the red herrings (Score:5, Insightful)
I doubt this has anything to do with any bad news
for Google. It is my guess Schmidt just wants the
money here and now. Totally understandable.
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It is part of a deal to have a more diverse group of stakeholders. :P
So you are indeed right that this shows nothing about the performance of google.
And i guess the money will always come in handy as well.
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Bear in mind that Schmidt is selling a good portion of his class A shares which only get one vote per share, but none of his class B shares which get 10 votes per share. I'm not sure how much this will affect the balance of shareholder voting, but he is still holding on to the more influential shares.
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Not that easy. Buying A class shares requi5es a lot of real money. After you get above 5% you have to start declaring things - like how much you own, how much you plan on buying, and why you are buying.
Re:Time to haul the red herrings (Score:5, Informative)
Diversifying investment portfolio is something that all good investors tend to do. Eric Schmidt is a businessman too.
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Diversifying investment portfolio is something that all good investors tend to do.
Agreed, but his Google assets were built by building up Google into one of the more diversified companies around. Sure they don't own any salt mines yet (depending on your definition of salt mine), but they went from building a search engine in Silicon Valley to laying fiber in Kansas, creating self-driving cars in Nevada, writing a cell-phone operating system used by manufacturers around the world, buying Motorola's cell phone business, operating stores for books, music and software, operating an email net
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I doubt this has anything to do with any bad news for Google.
Agreed. But it may also show that Schmidt doesn't expect huge growth in Google's share price...
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A likely possibility is that he wants to avoid conflicts of interest. E.g. when investing in other companies.
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Did you do the math? If it sold at the current share price, that's over $2,500,000,000.00. I don't think I'd worry about interest with that kind of scratch. Even at 0% that's enough money for 500 people to live well for a lifetime. Stock can't normally be used to buy stuff.
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The only things which are certain are death and taxes. That he wants to diversify his holdings is pretty understandable given how much of his wealth is all in one basket. Single stocks can rise and fall dramatically on a whim (see the iPrecious). And as chairman he will not be their forever and it is certainly better to lighten the stake while still remaining at the company and holding a good share than after leaving it.
By the way... there's a Red under your bed....
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Is it "totally understandable"? Interest rates are basically zero, which means that taking money "here and now" doesn't gain him anything. He might want to invest elsewhere in order to diversify his portfolio but such a move would only make sense given an underlying principle that he a) suspects something may perform better than GOOG or b) has uncertainties about the future of GOOG (to the point where cashing out now and stuffing cash in his mattress is better than holding onto GOOG). It isn't to say either of those reasons are "bad" from a savvy-businessman point of view, but it also doesn't mean you can simply dismiss the action as "totally understandable" either.
It gains him not having all his money in one basket, and not tying all of his fortune to a company whose stock is at an all-time high and may be overvalued based on its possibly saturated growth potential.
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He'd probably quadruple his money if he began short-selling construction stocks in Turkey right now :) They're setting themselves up for a big construction bust in a couple of years at most.
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One possibility is that he has some plan with the money besides diversifying - probably something charitable, or something idealistic that he couldn't get the two other on board with.
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Re:Time to haul the red herrings (Score:4, Informative)
It's high risk. Having a large proportion of your personal wealth on one stock is ALWAYS high risk. That stock is at an all time high. P/E is at 24 and cash flow appears to be peaking.
That's not to say that they aren't in a good financial position. They are very strong but nobody can know the future. Moving a large portion of his investment to more conservative positions is prudent.
Stock is risk, cash in hand isn't. (Score:3)
I'm getting a price for GOOG of $785. That's $2,512,000,000 of literal cash under the mattress. IT's not that GOOG is a particularly risky stock, but money in the bank is more or less zero-risk; putting enough away to live like a king for the rest of your days certainly seems to me the absolutely perfect retirement strategy.
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In an era of "quantitative easement", leaving money in the bank does involve risk.
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It's called quantitative easing. But the relationship of that policy with inflation is a lot more complex than some people would have it, it might well have been riskier to not do it - even for people with billions in the bank.
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Moreover, I'm kindof expecting something like "Eric Schmidt buys SpaceX and travels to Mars" in following weeks.
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It has to do with bad news in general ...
Equities, banks, bonds ... it will all blow up. Own physical stuff ... and be sure some of it is in places out of reach of governments you don't outright own (ie. on an Island) in case the plan for neo-feudalism doesn't pan out and there is a socialist revolution instead.
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Ownership is just a notation in a book somewhere.
When the revolution comes that will be erased too.
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As I said, be sure to stash some stuff on islands (ie. yachts, precious metals, lots of equipments including a bio-fuel plant etc etc). The revolution might confiscate wealth inside developed nations, but it's unlikely to come to more primitive island states with smaller legislatures and populations which are more easily controlled.
The plan is austerity, economic collapse and neo-feudalism though ... not revolution.
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Primitive island states are unstable.
Plus it gets real boring to live on a place that you can circumnavigate in a couple of hours.
You are much better off in a small nation-state like Monaco or Jersey.
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That's what I meant, if it doesn't have sovereignty it's not really interesting ... although Monaco seems a much better idea than Jersey, too many plebs on Jersey with much more political power. Monaco is primitive in some ways.
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Given that the Renimbi is formally pegged to the dollar by the PBoC, how would that change anything?
If the Chinese were to float their currency, their trade balance would reverse in a hurry, which is something that they definitely don't want.
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If it was me I'd be getting into either the new space economy or the new energy economy. Elon Musk is in the sweet spot for the next decade or so. The information economy is net a plateau. Too many players.
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104 billion dollars? How much cultural impact can you have with that amount of cash? Diversifying to other investments would be part of it but with that level of wealth I suspect he'll be having a large cultural impact considering some of his statements.
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Bill Gates did something like this too in the late 1990's. Again the reason was portfolio diversification. He then left as CEO within 2 years after that. So it was clear he was planning for his life after Microsoft at that point. I'm not sure what Schmidt's age is, but it could be something very similar.
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He's cashing out when he has the chance. I'd too. After all, owning too much Google stock prevents me from investing in or working on other things, especially stuff that might compete or be perceived to compete with Google.
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Dunno, 'herd' seems to fit better.
Or perhaps 'gaggle'.
The stock is sky high at the moment (Score:2)
Insight into Google's legislative future. (Score:3, Interesting)
Here's a hypothesis:
Google beat the last challenge from the antitrust attorneys from Texas, but it can't count on the future.
Specifically, other states or federal entities could attack it, and then there's all of the EU, which traditionally takes a harder line on privacy violation and monopoly.
Schmidt is no dummy and so he's divesting a reasonable amount (less than half) of his stock to hedge against a potential catastrophic future decline.
Remember what happened to Microsoft. They basically floundered hard after an assault by the department of justice. If the same happens to Google, they'll have to put most of their plans on hold for a decade as well.
When the Billionaire makes a move... (Score:5, Interesting)
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Um, almost $800 per share. Anyone who thinks it hasn't peaked can just look at Apple, who is now a litle more than half that - when they were equal just a matter of months ago. Hell yes now is the time to sell. The bump will happen to Google, too, and its stock will drop and that much of a shit is huge money when talking about millions of shares. Not scary news, just smart money keeping smart money.
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Except, of course, that nominal price doesnt say ANYTHING about whether a stock is cheap or expensive. A 1000$ stock can be cheap and a 5$ stock can be outrageously expensive.
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Google has enough going for it to maintain their position but I'm not entirely sure they can grow much more.
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Yes, but google has room to grown. I'd be surprised if Apple did anything interesting in the next year, I expect it of Google.
Google is an advertising company that has blown massive amounts of money on side products that have effectively been loss-leaders for their advertising revenue.
The thing about advertising, though -- the more people see, the less its worth.
Google doing something "interesting" is of virtually zero value from an investment standpoint if they can't convert to revenue, and so far they've shown even their biggest bets (like Android) haven't.
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If you'd traded those aapl shares for goog six months ago, they'd be worth 1570.
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It's news for a reason. It seems unlikely he is strapped for cash, and as he's acting Executive Chairman of Google, a significant stock sale has to mean he's convinced the market capitalization for his Outfit has peaked.
Or it might just be that he's planning to do a substantial investment in something else and thinks this is a tax-advantageous way to raise the capital. (I've no idea what his acquisition price was, but you can bet it was a lot lower than now. It's not real profit until you sell.) There's no way to work it out for sure at the moment, since he's under no obligation to tell you what he'll be doing with the proceeds.
On the other hand, if he was truly worried he'd be actually looking to sell a larger fraction of
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I like most of your post, but I think you are wrong on this point.
If you donate stock you can deduct the full market price from your tax returns. If he sells the stock first he has to pay capital gains first. So it is always better to gift Google stock to a charity then to sell the stock and gift the money - i.e. the charity will always end up with more money. (Now, the first thing most charities will do is to sell the stock).
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But those charities don't pay any taxes on such stock sales, right? :)
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And how/why would they?
Case #1: I donate $100 in cash to a charity.
Case #2: I donate $100 in stock to a charity. That stock has some unrealized capital gain.
From the charity viewpoint, how would they know what tax they should pay? For the gifter's standpoint – they are donating exactly the same value – right?
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That is, of course, unless the charity is the US Govt. I hear they need some money to pay off a few debts. Eric may be doing it this way to give them a helping hand.
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Last earnings announcement the gross margins fell which is a precursor to a falling stock price a lot of times
Revenue and earnings went up but falling gross margins is a bad long term thing
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It seems unlikely he is strapped for cash
That all depends on what level you set 'strapped' at. It seems likely that he won't be sitting on this money - it's much more likely that he has an investment in mind, probably a new company, with a faster growth rate potential than Google. Google can be completely financially sound and still have a slower growth rate than a risky startup.
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Except that in inflationary periods, real assets don't fall in value. In fact they may go up in value because people value those real assets. If you are looking for a hedge against inflation stocks are a good way to good. Then add in that a fair chunk of Google's profits comes from overseas.
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Hard assets don't usually fall... stocks with lots of future optimism priced into them often do.
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China will demand payment very soon
Bonds don't work that way! You buy a bond with a coupon schedule, you get paid on that schedule and then, at the end of the term, you receive the principle back.
Where on earth do people get these bizarre ideas about "demanding payment"?
If the Chinese elect not to roll those bonds over, the renimbi peg to the dollar falls apart, their currency skyrockets and their trade flows reverse. A country's capital account MUST equal the opposite of their current account - this is t
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China can demand all they want but the bummer for them is that the debt is denominated in our own sovereign currency. We can just print cash to pay them if we want.
We could also just decide to void that debt and not repay it. It would substantive consequences, but those may be more ambiguous than whatever action the Chinese were considering.
I think the primary reason they buy Treasuries is to keep their currency in check. Getting paid back is nice, but I'm pretty sure investment isn't the principal goa
Insider Trading??? (Score:2)
I am not exactly sure what insider trading is, but since he not only knows the inner workings of Google but controls them, how is this not insider trading?
It would be pretty simple for him to influence stock price right before he sells, and theoretically influence it down right before he buys back stock. Hell, it would be simple enough to lower the stock price or rise the stock price of other companies. Just announce that Google plans on competing with company X; Stock falls and he can quietly buy up a big
Re:Insider Trading??? (Score:5, Informative)
I am not exactly sure what insider trading is, but since he not only knows the inner workings of Google but controls them, how is this not insider trading?
It *IS* insider trading. Any CEO selling their own stock is insider trading. That is why the SEC requires documentation and a public disclosure of any potential transaction before the sale happens, which is what the linked document is. [sec.gov] The SEC cannot prohibit such sales, but they do put them under extremely tight restrictions - such as preventing such sales near the end of a quarter, when financial results are known internally but not yet released.
It is important to note that this does not mean that Eric *is* going to sell 42% of his stake, it means that he is now *allowed* to sell *up to* 42% of the stock. Many such filings end up with a smaller amount sold.
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Excellent post.
For finer detail you notice that Schmidt has file a “plan” to sell 2.4b over the next year. That plan gets handed over to a 3rd outside party so Schmidt is removed from the timing and execution of said plan. So, at this point everybody on a level playing field.
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For finer detail you notice that Schmidt has file a âoeplanâ to sell 2.4b over the next year. That plan gets handed over to a 3rd outside party so Schmidt is removed from the timing and execution of said plan. So, at this point everybody on a level playing field.
One game executives can play is to have several "plans" at any one time.
These plans can be suspended and resumed as needed, in order to match actions to the stock price.
It lets them use their insider knowledge and deflect scrutiny by saying "look, I have a plan approved by the SEC!"
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All trades of stock by that corporation's officers are "insider trading;" the question would be whether it's illegal insider trading. In a nutshell, if he knows about something that the public doesn't and trades based on that knowledge, it's illegal. (Although the Zynga guys seem to be getting away with it so far.) Since he's such a large shareholder, anything he does is going to have some effect on the price, so it's hard to say whether he sold because he knew it was about to drop or it dropped because he
"42% of stake" (Score:5, Informative)
Careful with the vagueness there. That's 42% of his stake in Google, not to be confused with 42% of the company's stock.
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Nobody mentioned his $1.5B divorce? (Score:2)
Wasn't that long ago, and certainly cut into his spare cash. Also, Planetary Resources, Inc probably needs cash soon.
Re:Capitalism is failing (Score:4, Interesting)
Or we could have a better incremental tax system where dirt poor is not the bottom and fat rich is not the top.
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Tax system needs overhaul (Score:2, Insightful)
One big problem with our tax system is that it taxes work far more than wealth. Tax rates on earned income are high, taxes on dividends and capital gains are low. So a very high-paid individual (think good actors, sports figures, etc.) who may bring in $10 million of annual earned income gets taxed at ~50%, while someone who collects $10 million in dividends annually gets taxes at 15%. And the larger tax on work extends way down into middle class incomes, where it constrains people much more than it does my
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Or at least "earned income is earned income". The income you make from investments, and the income you make from working should be taxed at the same rate. Then there wouldn't be any of this bullshit Rmoney pulls where he delivers a speech to a company (which, lacking a better term, is work) and yet his accountants put it down as an investment in the company and there for is taxed at 15%. And yes, if you make a bad investment, you get to write off that bad investment against the good investments. But at the
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The market economy is a tool, not a way of life. Beyond a certain point, monetary rewards do not cause people to aspire to be more productive, so what's the point in letting that wealth accumulate in their hands? Power? You can have a tax system that is far more progressive than it is today while still rewarding hard work.
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You want to incentivize paying your employees better but without eliminating the ability to pay executives great money.
All employees that actually do anything, are on fixed, and very inflexible salary. It's ersatz sales drones and arrogant executives, that get any variations.
Re:Capitalism is failing (Score:4, Insightful)
> Increasing wealth at one pole, increasing misery at the other.
This has nothing to do with capitalism. This has to do with the government raising taxes aimed at the middle class since the rich can move and the poor can't pay. Decade after decade the middle class shrinks while prices go up, taxes go up and the government becomes like a pimp managing tired older whores.
When both political parties give the government's ATM card to lobbies and spend trillions on what they think will get them elected again it appears that there is no hope.
There is only one solution: become rich or become poor.
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Except that US taxes have been trending down for 30 years, and wages have not kept up with inflation.
Re:Capitalism is failing (Score:5, Informative)
Federal Income Tax is down - almost every other tax has increased. Local wage taxes, state income taxes, sales taxes, property taxes... It took the recent financial crisis to knock us back down to 1970s levels, but expect that to ramp back up as the economy recovers. Just prior to the financial crisis, we were at an all-time high for total tax burden as a percentage of GDP.
Got my numbers here. [businessinsider.com]
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That graph doesn't agree with what you said. Our all time high was in 1944 (94%), and we haven't been anywhere near that in a very long time. We're currently at 33%, which is a huge difference, although that is only tracking the very top tier of income tax. Also, that graph isn't very useful. If we added a new tax tier that said anyone making more than 1 trillion dollars a year would get taxed at 94%, the graph would show 94% at the highest tier, but no one would ever be in that tax bracket, so that num
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Please continue reading. I was referring to the TOTAL tax burden: Federal, State, Local. You were only looking at the Federal chart, which has been bouncing along at about the same rate since the 50s.
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well, in the movie my man godfrey 1936, there is a line where the character say " i don't mind giving 60% to the government " ... which he's implying his tax rate is 60%. this seems to conform to the chart.
What we need to find the distribution of the income
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Lol, I got distracted by the pretty chart, my bad.
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Actually, there's a third solution. You may not have thought of it.
If wealth condensation were an unstoppable force, it would have run to completion thousands of years ago and there would never have been a middle class in all of recorded history. Clearly there is some counteracting force. Something which we haven't since... let's say 1945.
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A middle class as we know it is a fairly recent phenomenon, probably starting in the Netherlands in the 17th century.
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There is only one solution: become rich or become poor.
That's two solutions.
Taxes aren't the problem either (Score:5, Interesting)
In Europe taxes are spent largely on public works, public health, and public services, so taxes are not a net loss for citizens but contribute directly to their welfare and to the smooth running of society for the man in the street.
The difference in the US isn't so much in the rate of taxation, but what is done with your tax dollars. They're not spent for the social good to any large degree, but fund the huge military complex and benefit the rich more than the poor. (Here the rich pay much more tax than anyone else.)
The US "misery" problem to which you refer is much more deeply rooted than could be solved by changing the rate of taxation. It can't. Your society is structured to create misery.
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European "wealth" has been built on the blood and misery of others. Namely: colonies. And of course since there are no more colonies, many European countries are going bankrupt, fast. France, Italy, Spain, etc.
So you guys got to learn how to work and make money yourselves, then you can give lessons about tax.
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And while you wont find surf in Brighton (strange example to give btw), you'll find it on the south west coast. Some of the best waves in the world, so I'm told. They even have some yellow sand too.
All the bars are full of Australians, in all parts of England. We need someone to serve the drinks!
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The military complex is part of the problem. But what's more visible are the contractors and their sub-contractors, wasting away taxpayer dollars. That's what's causing the big government backlash recently.
Most people don't care that half of our tax dollars are funded for military research. After all, part of that goes to DARPA, which gave us the internet. However, it's a bit upsetting when we see the government pissing out tax dollars away by paying a contractor several hundred dollars an hour for three or
Hell Yeah! (Score:2)
We need flying drones, walking drones, floating drones and rolling drones.
Then we need to replace the current people who are flying this generation of drones with drones.
We can get piloting drones, strategy drones, driving drones, refueling drones and engineering drones.
Once we have that in place, Obama and Panetta can run the entire conflict without the need for any 'military complex'.
FREEDOM!!!!
Which only leaves the question -
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Re:Capitalism is failing (Score:5, Interesting)
Yes, because there's no poverty or starvation in Marxist countries at all right?
Re:Capitalism is failing (Score:5, Insightful)
Yes, because there's no poverty or starvation in Marxist countries at all right?
Nah. It is just that in Marxism, everyone is equally poor.
Re:Capitalism is failing (Score:5, Interesting)
Nah. It is just that in Marxism, everyone is equally poor.
The choice isn't necessarily between extreme capitalism and extreme socialism...
Socialism to the point where people don't starve, can start over after failing and are given a decent chance to go to university, isn't so expensive that hard work won't be profitable anymore.
(Socialism to that extend, does however, encourage risk taking, as there's a system to help you if you fail).
It's often called liberal socialism, many/most countries in Europe (especially northern Europe) are quite successful with this approach.
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Liberal socialism didn't work as well as expected in many places (see Spain).
However, there is one easier to digest concept also: welfare state.
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Yea, Europe isn't my model for any sort of success fiscally. I suspect the solution is just something we haven't figured out yet. It certainly has nothing to do with socialism. Capitalism is at least, not a political dogma. Capitalism is "how money works" All the things you hate about it, are not a part of it. Kickbacks, loopholes, all that sort of shit are people gaming the system and are actually more socialist in nature than anything else.
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What do you mean, that kickbacks and loopholes are not part of "how money works"? Sorry to bust your bubble, but the world doesn't actually work as a Randian utopia.
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You can be a capitalist while being a socialist, they aren't mutually exclusive domains. Many of the socialist countries in the world also have capitalist economies... Hell, the biggest communist country on earth is becoming a bigger capitalist country than the U.S. Hell, capitalism existed in the U.S.S.R.
As you point out, capitalism is how money works. Where there is currency or trade, there is capitalism, no matter what the government is.
Socialism is a political philosophy, and capitalism is an econom
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Capitalism is at least, not a political dogma. Capitalism is "how money works" All the things you hate about it, are not a part of it. Kickbacks, loopholes, all that sort of shit are people gaming the system and are actually more socialist in nature than anything else.
Amusingly, just a couple of comments down the thread from yours is someone explaining to us how "true Marxism has never been tried," which of course is the communist's classic excuse when the failings of communism in the real world are pointed out. Fundamentalists of all sorts never seem to realize how much they sound like each other.
Communism in the real world is brutal and corrupt. Capitalism in the real world is brutal and corrupt. You can talk all day about they way you think things ought to work, bu
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Any system would work with an honest, caring, non-corrupt government.
Which is why none of them ever work.
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I think Orwell would say all farm animals were equally poor, except for the pigs...
So, *almost* everyone is equally poor.
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It is time for the workers, lead by their Leninist vanguard party, to smash the rule of the bourgeois parasites and establish a dictatorship of the proletariat, opening the road to socialism.
Yes, let's replace those who have skill and initiative with those who are unwilling or unable to make their own way in the world. I've always found it quite ironic that the "proletariat" has such disdain for the capitalists upon whom they depend to make their living.
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capitol gains tax post fiscal cliff is about 23.5% IIRC...If he had done this in December, it would have been about 15%...If you factor the marginal income tax rate that most people pay, the average federal income tax comes out to about 18-21% based on actual household income (for normal households of say 30k - about 2500 k)
The real benny comes in with no SS or Medicare taxation.
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Depends on your income. For Eric Schmidt long term cap gains will be 23.5.
This Eric pays 15%.
My kids pay 0%.