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What should the New Deal be like?

We are living in an age where 1% of the population have 30% of the wealth, and as those plutocrats grasp that wealth tightly and give their sons and daughters every opportunity to follow their own paths, they turn into aristocrats and so the system goes on. I don't say the government has to cut the incentives and collect equal amount of tax from the "biggies". Taxation already differs for those biggies contributing to economic growth. But on the other side of the coin there are those who can't make the ends meet. Minimum wages are just above the poverty line. So, how is it possible to solve the problem of excessive inequality in income distribution? What can be done to implement the necessities of being a social state?

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  • Sep 26 2013: I am not proposing to find the midpoint between socialism and capitalism. What I am seeking to achieve is wider ownership of truly commercial business and to achieve this I propose a single fund into which all contribute. Such a fund invests on behalf of all the people and therefore individuals are not exposed directly to market risk. Such a fund would be professional (non-government) managed and would be able to create a low risk profile due to its size, diversity and long term approach.

    The fund could through its power mandate low debt to equity ratios in its businesses and reduce the boom bust cycles.

    Boom and bust cycles are created by excessive credit growth and excessive credit growth is driven by the need for short term profit growth. Leverage is a method of increasing net earnings but to keep achieving profit growth quarter after quarter means more and more borrowing.

    Currently markets reward risk taking and high gearing as a share price is simply put “The present value of the businesses growth opportunities”. If a company cannot increase its earnings it share price falls – this is wrong because it leads to disasters of many kinds, we need to stop rewarding high risk.

    A fund however that is in the very long term (100 years +) could have the effect of smoothing boom bust cycles because it would run more conservative ratios.

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