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21,000 OR BUST!

January 28, 2017

21,000 OR BUST!

The Dow broke 20,000 for the first time yesterday to the delight of Wall Street’s moneychangers and paper shufflers. My response? Wake me up when it’s over. Why? Here’s why. This great event had nothing to do with economic performance which, along with tepid demand in an underperforming economy, remains dismal. It represents a paper pricing based upon Trump’s promise to reduce corporate taxes and nullify regulations which he says stymie business accompanied with the usual disproven trickle down argument that business will expand and provide more jobs if they have more after-tax money with which to expand. Not so – history proves they put such monies in their pockets, or in the Caymans, Zurich or other tax-hiding venues rather than re-investing such monies in our economy, and in any event, why should they expand to provide more goods and services when demand for such goods and services is tepid due to wage inequality? They need more customers, not handouts.

Trump neglected to point out that if business has more money as a result of such legislative largesse that our treasury then has correspondingly less money resulting in expansion of our national debt, and since trickledown economics doesn’t work, all the rest of us only get more debt plus increasing interest to pay while Wall Street moneychangers and paper shufflers make off with lots more capital gain and carried interest loot and while paying less taxes to offset such a bump in the debt via the courtesy of their congressional toadies, toadies who are (they say) staunch foes of increasing “the debt” with their austerity economics babble, babble which apparently is inapplicable to friends with deep pockets.

Someone tell me how such a transfer of wealth by legislative toadies to the already rich does anything for the rest of us other than to increase our liability to pay a heightened national debt plus an interest rate the Fed says it will increase three times in 2017. Why doesn’t corporate America do something to make our economy hum rather than depending upon corporate welfare of tax cuts and loosened regulations to enhance their balance sheets (and stick the rest of us with the result that you and I either pay or are liable to pay)? The paragraph following may shed some light on the answer.

We now know that wage disparity widened in 2016, i.e., wage inequality worsened. Trump has used the wrong measurement (Wall Street’s enhanced capital gains) to describe economic growth. The only driver of growth is aggregate demand in the marketplace per Stiglitz, Piketty and Keynes, and with median wages adjusted for inflation treading water, there is little to no growth because ordinary American workers do not have the wherewithal to go to market. Thus an increase in the Dow which, incidentally, doubled during Obama’s eight years (though median wages were stagnant during such period) is in my view meaningless since it does not describe economic activity or increased productivity in the workplace. It is rather only an artificial measurement of Wall Street paper having little or nothing to do with economic activity but is rather a measurement of corporate welfare lavished on Wall Street by grateful politicians in return for campaign contributions designed to maintain the status quo and stick the rest of us with the bill – at interest.

Today I hear that some Republicans who are meeting with Trump in secret sessions are calling him a “clueless child.” That gives me some hope that this brazen bully’s initiative to give the rich and corporate class a big tax cut and a reduction in regulations at our expense will be derailed in the Congress when presented. After all, we owe a national debt of 20 trillion dollars and Republicans are always and forever complaining about how that is so destructive to America and have even adopted austerity economics as policy in order to stop or at least slow any additions to such an immense debt, so here’s their chance to show themselves as trustworthy and responsible guardians of the public treasury. Republicans, do your duty!       GERALD        E






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