The prosperity of Western Civilization is built upon accumulations of money. Accumulations of money translate into money to lend and, the reverse side of the coin, money to borrow. Borrow for what? Increased production – the making of better and/or cheaper goods. (It is interest, and only interest, that draws this money out of the hoards.)
It is the accumulations of money available for investment that means that even though we work nowhere near as hard as people in earlier ages, we live vastly more prosperous lives.
Today, the accumulations of money built up over generations, are being either destroyed or dispersed.
Fred’s shares go up in price and he sells them for $150,000 to Harry.
Harry gives Fred $150,000 and Fred gives Harry the shares in the company.
Fred has made a $50,000 profit.
He lives off that while he plans his next trade.
The problem is that what he is spending is not profit – newly created wealth, it is Harry’s accumulated money – old wealth.
Where there once existed the shares and $150,000, there now exists the shares and $100,000.
The capital has been dispersed. The money still exists, but it is no longer in a form that is available for investment.
In a world of almost zero interest rates, people are forced to speculate in order to get a return. Whereas living off the interest leaves the accumulated money intact, speculation for a return disperses it.
“Savings is used to finance an increase of production, a profitable business. The interest is paid out of that increase. Rising share price finances nothing of course, and the capital gain of each selling shareholder comes from the next buyer’s capital.” Keith Weiner
Selling off portions of a productive farm is capital destruction; speculation in stocks or real estate is capital dispersal. In terms of future investments, one is as bad as the other.