#capitalaspower — Public Fediverse posts

Capitalists who are selling shares of their company on a stock exchange, need to determine what price to sell those shares at. The way they do this, is to forecast their earnings for a given period (usually 3-5 years) and to then use a discount rate to discount that 3-5yr total to present value. And the level of confidence they have in their own forecasts, is what determines how risky their valuation is considered to be. When they eliminate enough of the risk by getting investors to be confident in the future of the company, the discount rate goes very low, and present value goes up (share price).

Part of what we need to be doing, is increasing any and all uncertainty in their forecasts. Strikes, Boycotts, Unionization. Sabotage of their productive capacity, Smear Campaigns, Influence campaigns, barrages of lawsuits, exposing of scandals, pressuring politicians and government bureaus to enact legislation that places the corporate future at risk. All of these make a great start.

" the discount formula, the social habit of thinking with which capitalists began pricing their capital in the fourteenth century.
[...] It calculates the present value of capital based on the future magnitude of earnings. These future earnings, however, cannot be known in advance. Furthermore, since capitalists do not know their future earnings, they cannot know the rate of return these earnings will eventually represent. Analytically, then, they are faced with the seemingly impossible task of solving one equation with three unknowns.

In practice, of course, that is rarely a problem. Capitalists simply conjure up two of the unknown numbers and use them to compute the third. The question for us is how they do it and what the process means for accumulation. The previous section took us through the first step: predicting future earnings. As we saw, these predictions are always wrong. But we also learned that the errors are not unbounded, and that, over a sufficiently long period of time, the estimates tend to oscillate around the actual numbers. The second step, to which we now turn, is articulating the discount rate — the rate that the asset is expected to yield with the forecasted earnings. And it turns out that the two steps are intimately connected. The discount rate mirrors the confidence fortunetelling capitalists have in their own forecasts: the greater their uncertainty, the higher the discount rate — and vice versa."

https://bnarchives.yorku.ca/259/

#CapitalAsPower #Risk #DiscountRate