This is a great post. The Chicago Booth survey questions were indeed in bad beliefs. The analogy between fiat money and corporate stock is very useful. It is thought by me would be useful for a few MMT economists to touch upon that declaration. It seems if you ask me that the main thing would be that the project has a positive NPV to the Federal government, not to society all together just.
That is, the task must raise the path of expected real surpluses in order to avoid inflation. Imagine a national government that has continuous real expenditures and that imposes only a lump-sum tax. This government attempts to issue new nominal liabilities to finance a project that will boost GDP by 1 percent.
Since the path of surpluses is unaffected, this policy would create inflation and increase no real income — even although the project is socially productive. Imagine that the same situation Now, except taxes are proportional to GDP rather than a lump sum. The project raises tax revenue by raising GDP Now, and to at least some extent this would offset the inflationary impact. Would MMT economists agree with what I had written about both hypotheticals just?
To avoid complication, let’s just assume that people have 100% possessions of a business. This viewpoint can be easily expanded to one who has partial ownership of the business enterprise through buying its stocks in the market. As 100% owners of the profitable business, we employ officers to add value to services and goods produced to generate income for us. Every dollar earned from the business enterprise wholly is one of the owners. ‘Passive’ in nature. With this, we can say the earnings are aggressive income to the owners. The owners have the choice to either keep carefully the money in the business as retained cash flow or issue the wages out as dividends. 10M still considered passive?
I claim so based on the 3 questions asked above. To the owners, these dividends are in fact simply a proxy to obtain the passive cash flow of the company. Your take regarding the HDB is nearly a similar as the above-mentioned situation where it fulfills the 3 questions asked. 5M of the earnings fully belonged to all or any shareholders as well (I really believe your argument skipped this point too).
10M of income is comparable to the local rental income we get from a fully possessed HDB property. Now, let’s think from the standpoint of the stock trader. Here, I would trust you as an investor should consider both capital appreciation and dividend return but I just want to highlight that dividends in the investor’s perspective are still passive income.
1.50 due to the XD impact. 2 with no dividends declared. 1 from their investments. Considering both unrealized and noticed gain, it is clear they are all aggressive income to both investors. Having no online gain between Investor A and B does not suggest there are no aggressive income included.
I also concur that your remaining pocket right pocket – zero sum game theory makes sense (but this does not mean dividends aren’t passive income). Because dividends are usually paid in liquid cash out of the company, it makes sense that the stock price should drop by the amount of dividends released. If not, we will find that the web well worth of the investor (which includes both dividends received as well as ownership of the business) increase inexplicably. However, this impact is just a logical stock market event to ensure that – supposing other things staying constant – the total amount of what owners received and what the business has been the same before and following the event.
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To conclude, CD-XD trend is just an Event which does not describe that dividends received aren’t aggressive income but it generally does not indicate that dividends are not passive income. Viewed in the proper way, the owner’s profits are passive income and since dividends originates from the owner’s profits usually, they are part of the aggressive income in every sense of the word. I got to your post because a close friend known it if you ask me. Your post will need to have generated strong interest as I understand that we now have some follow-ups in other financial weblogs that mostly agree with your point that dividends are not passive income.
However, I feel that if we have seen this problem as a whole, the logical (as well as intuitive) description contradict the idea that dividends can’t be considered aggressive income. We’ve communicated a while back and I know you are, like me, an enthusiastic learner of stock investments. Hope to listen to more about investments from you. PS: I appreciate that visitors to share their views concerning this in the remarks section below. Also, GV gave an interesting answer to this comment. Readers can refer to his blog article for your and choose for themselves which viewpoint is more valid and logical.