Tuesday, June 12, 2018

Trump and the stock market

Obama made the stock market go up by 200% over his time as President. Trump has made it go up by 50%. Bush had made it drop by 20%. 

Somehow Trumpers complain about Obama's 200% rise as being nothing really, and Trump's 50% as being a huge big deal. They also don't talk about Bush -20% at all because they think Obama was an absentee president during Bush's term in office. (c.f. Katrina Pierson's comments about 9/11).   

This indicates an obviously racial slant to Trumper perceptions of reality. They don't want to admit a Black President could do a better job of managing the economy cause their ego is too fragile to accept the reality that black people can be better than white people. 

I prefer to look at the handling of the economy without race tinted glasses. 

I am drawn to Ben Bernanke's comment about the "Willy Coyote" moment in 2020. 

Here is what I suspect he is talking about. 

The entire economy is a debt trafficking operation. In order for me to pass one instrument of debt on to another person in the economy (i.e. a transaction) - I need to be able to able to convince the other person that the instrument I am passing holds value. I am effectively borrowing from the person I am passing on the debt instrument to, and the debt has to be effectively collateralized. 

If I can't adequately offer collateral on the transaction, the counter-party risk rises and the entire transaction becomes unstable. This commonly happens in a bubble. 

A bubble is driven by misperceptions of value of the collateral. We see a huge increase in the debt trafficked during a bubble (you sell a lot but also have to keep buying a lot) - the easiest thing to do in such a situation is become over-leveraged. I.e. borrow more than you can pay debtor's insurance on. Bubbles can be extremely destructive - they can destroy actual productivity. 

What we are seeing in the economy today is a bubble riding on the recovery that Obama put into place. Obama put into place the mechanisms that developed a deep level of productivity in the economy. He could not prevent the immediate loss of productivity after the recession, but he put in place the ladders we would need to climb out of that hole. Not everyone was able to climb out the hole or forget how they ended up in there in the first place but the ladders were put in place. 

What Trump is driving is the bubble - he is making it seem like he put in the ladders and that they extent to heaven itself. This is a misrepresentation of the facts. Trump does not have the vision to drive real growth (he has singularly failed to do so in his own corporate ventures numerous times). He is however quite famous for driving bubbles that rob from the poor and give to the rich.

This is what is going on right now. He is driving a bubble in the stock market and that is acting as a giant siphon that is taking wealth stored in people's retirement accounts and transferring that into the pockets of the rich. This is why we are seeing all the stuff going on at CFPB. Mulvaney is killing the canary in the coal mine. 


Post a Comment

<< Home