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Originally Posted by aelle  How else do you make a profit than by providing something that customers want to buy, for the price at which they want to buy it? And isn't offering what people want the definition of "providing value"? |
Well, "providing value" is a term that you and others use. To me, the phrase "offering what people want" is better defined by the term, "sales" or "selling." But, that's me.
Anyway, how else one can make a profit, without offering anything to the general public, is by buying (at a low price) and selling stocks (at a high price). This is the very nature of the question originally posed--how stock trading benefits society.
But, as you suggest in the rest of your post, Pete's done about the best at answering the question as anyone can. I still think stock trading is driven by profit motive, moreso, even, than business transactions, as it must look deeply in order to understand how it benefits society, and therefore, in essence, I still see such transactions of no inherent value, in and of themselves. It's still just another way to make money.
That said, I can see how traders would instantly jump on the seemingly inherent unfairness to taxing financial transactions. I think a straight comparison would be a national sales tax, which would tax product transactions, and since there is yet such a national tax, it makes the Tobin tax even more unfair. Not that I'm against a national sales tax, but there's no way I could support that, as long as there's already an income tax (and a progressive one, at that).
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Now, it's hard to illustrate how liquidity benefits the apple industry, to stick to my previous example, but it certainly is a benefit to commodity industries. A corporation that manufactures steel will greatly benefit from a liquid steel market (more certainty, more fluidity, less costs), which will benefit the companies they sell steel to, which will eventually benefit the consumer with bridges, buildings and railways built when needed for the most reasonable price.
Actually, many large corporations who extract/refine/manufacture commodities will also have commodity trading desks. (Hm. Is that everywhere or just in Asia?)
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I'm still working on understanding what liquidity is (part of the reason for this, is the accounting definition I have stuck in my head). Once I understand that, I might be better able to understand how that benefits anyone.
That said, what is the opposite of market liquidity, then--volitility?