Posts tagged ‘stock market’

Well, I Told You So

Global markets are tumbling this morning and that will be reflected today in our stock market. Now the reasons for this are many, but the reality is the stock market is a creature of fallible human expectation and herd mentality (animal spirits). Either a company is solid, and growing or it is not. Its stocks should be a reflection of that. But when the market gets over heated, which is a term for over optimism for the economy, prices get out of line with reality. So what shakes investor confidence? Well, the fear of inflation and rising deficit. Hey, guess what. The Republicans and President DFF have added to the deficit by the massive tax cut and that 1% with all their extra cash drive inflation. Don’t see wages going out of sight do you?

But while, and yes if you can believe it, Fox (Hannity) blamed all this on Obama, a little reality was thrown on Hannity’s bull shit”

Jay Carney, Obama’s former press secretary, wrote on Twitter on Monday: “Good time to recall that in the previous administration, we NEVER boasted about the stock market — even though the Dow more than doubled on Obama’s watch — because we knew two things: 1) the stock market is not the economy; and 2) if you claim the rise, you own the fall.”

There is so much is this little statement. The first one, “the stock market is not the economy,” is really important to understand. Republicans have been using it as a metric to measure the economy and it has nothing to do with Main Street. When the reality of the last tax cut sinks in (no flow down), middle America will get the message. And all that money they just pissed away to the wealthy is what we needed to invest in infrastructure, education, healthcare, R&D, and our safety nets. It is the foundation that then makes the economy run.

The second one is taking responsibility for good things, not understanding as economists (not partisan hacks) that there is a cycle, and then trying to blame a down cycle on someone else. The reality in America right now is that people don’t really think things through and if they have a job and their income is rising, well hell yeah the President is great. This is what you might call the beginning of the fall. President DFF has been riding a wave and claiming he created it. It just broke on the shore and may leave him face down on the beach. If people sense a malaise in 2018, out go the Republicans. Note yesterday President DFF was out touting his tax cut, using anecdotal examples and claiming the magnificent stock market was his creation.

Then he said something true. Democrats will tax you. Yes we will. We will as a nation need to decide what programs we want and won’t pretend tax cuts will pay for everything. There is a real systemic problem with the world economy in that it is growing economic inequality. That inequality makes the world economy unsustainable and America’s economy is the leader in that. Systemic changes have to be made so that economic growth is shared by all and it is done in a way that does not destroy our future. The problem with implementing those changes is that those who benefit from the present system are in charge or buy those who are. That is why growing inequality is so dangerous. There is a breaking point where revolution breaks out.

One last thing as everyone who has a portfolio checks it. Economists have recognized the cycle of the market as unavoidable. But they instituted policies and procedures to ensure that these variations were not severe like the Great Depression. Yet Republicans have tried to circumvent these measures to bring back the unregulated market place. The thinking of John Maynard Keynes and others is still operative today if we care to learn from history. But in today’s world, corporations underwrite economic think tanks and universities so that group think can decide none of that is operable, then we have a crash. See 2008 and the Great Recession where all the economist who got it wrong never admitted they got it wrong.

We can hope that this fluctuation in the market is not too bad, but bad enough to wake people up to the film-flam artists of President DFF, Paul Ryan, Mitch McConnell and the hordes they lead. There is no free ride, we have to pay our way, and you think conservatives would understand that. The Stock Market is a place where people place bets on expectations, and in most cases it is a herd mentality game instead of a rational bet placing. So no it is not the real economy, but it tells you something about how secure people feel. This is the beginning of the reckoning for the fools we put in office.