Government By Stock Market

Photo Credit: From a Google Image Search – Daily Express

Stock Market – Reacting or Leading – Up Good – Down Bad

Life has become a bit grim all of a sudden. I can’t leave my house because I loved to smoke cigarettes and now I am in a COVID-19 high risk group. High risk means this could be it. Curtains. Bye-bye. The wheel of chance may have chosen the nature of my demise. And, to add insult to injury, my pension is in the stock market which is falling; falling like a rock, and I see no good news on the horizon to lift it up. 

The stock market seems to be ordering the President around. When the market likes what he says he will do, the market rises a bit. When the President doesn’t do what he says, or when he changes his plan, the market reacts. The market seemed to like that people would get checks. But I haven’t heard much about that lately. Stock buyers seemed to like the first iteration of the ever-changing stimulus plan. Today the market started up a bit but by the end of the day, with nothing accomplished, the numbers sagged once again.

We have heard that testing is great and that anyone who needs to can get tested. That is not what I see happening in my city. Every day we hear governors plead for masks, and protective gear for medical staff and doctors; ventilators are on the way supposedly, but we see that this is just hot air and you can’t make concrete objects from hot air. After an entire week which seems like a lifetime no one had received masks, face shields, gowns and these should be the simple things. Don’t you think people who own stock would perk up a bit if they knew that these items which keep doctors and staff from getting sick were being received. Mr. President, can you hear that, get hospitals the protective gear they need and the stock market might tick up. The President says that the Federal government isn’t a fulfillment center, but through emergency powers and FEMA, it is.

Talk about creating temporary hospital space with the help of the Army Corps of Engineers sounded smart. It sounds like states are getting some practical advice from the Corps of Engineers, but they are not actually building facilities, just helping officials find premises that might work, and so far not many spaces are up and running. Having the beds experts predict will be needed would also boost that stock market just a bit. 

Congress cannot agree on a stimulus plan. Republicans want to bail out business big and small, and although businesses have already been bailed out and had giant tax cuts, the stock market seems to like this plan. Democrats want to bail out workers. I’m not sure how the markets are reacting to this, but since stock markets must answer to stock holders I’m pretty sure that if the Republicans get their way stocks will rise again. With a president who keeps saying that things have been “beautifully” completed when we can see that this is a huge exaggeration the kind of stability that keeps the stock market calm is absent. I used to believe that 45 would kill democracy, now I think he might end up killing me and many others. He did not cause the virus, but he is not the calm rational presence we need.

FEMA is now in the picture and is supposed to help the states focus on local needs. But the stock market ended down despite this new wrinkle. Have all Presidents pegged their policy decisions so closely to the gyrations of the stock market? Clearly in this case the stock market wants what the stock market wants. Meanwhile I am trying to act like I will survive. I will grow tomatoes. I will be able to walk around a store again soon. To hedge my bets, however, I am trying to decide what will happen to me if I lose my income and my house. Thank goodness I discovered Led Zeppelin singing Traveling in Kashmir. So great. When things get dreary I go to Kashmir.

Blame the Stock Market for Income Inequality

From a Google Image Search – Wall Street Journal

Sometimes when you sit in the cheap seats, up in nosebleed territory, the world below seems far away and small. Although the individual actors may lose definition, the view offers compensations in terms of seeing overall patterns, movements and strategies. Watching the economy from the cheap seats is very different because all the action is above where all the rich folks are, and the cheap seats are below, sometimes far below. When doom befalls those in the pricey seats, the fallout reaches to the cheap seats, and although the impact is less, it makes already difficult lives tougher. But in the pricey seats there can be mayhem – some win – some lose – some topple back to the cheap seats. When those in the expensive seats, the box seats, win, the people in the cheap seats can watch the celebration but they are not invited to the after-party.

What my analogy says is that you don’t have to be an economics major to know about the ebb and flow of money in the world. And you don’t have to be an expert to draw some interesting conclusions. Listen to the news. Pundits quite often point out that people at lower income levels do not own stocks, but most economic decision-making must consider how bills, laws, regulations, taxes, all things economic (even tariffs) will affect the stock market. That means that the economic needs of folks who do not own stocks don’t matter much in decisions that affect the economy. Even so, the whole economy, top-to-bottom is affected by whatever economic measures are taken. The poor can get poorer, or there may be times when a flourishing economy at the top temporarily lightens economic stresses at the base.

Progressives blame Capitalism for the economic inequality that has become increasingly apparent both in American and globally. But if you listen from your cheap seat you eventually understand that a lot of the blame belongs with the stock market. Capitalism can and did exist without stocks or stock markets, but once the stock market turned investment into a game that anyone with money could play, it was as if Capitalism went on steroids. 

In order for the partnership to work, industry and business have to keep the investors happy with ever-bigger profits, rising stock values and higher dividends (if they are offered). This means that workers only get higher wages after owners and stock holders get paid. Since businesses get more investments when profits go to stock holders than when they go to workers guess who gets robbed?

When there were strong unions, workers could demand a share of the pie and then stop working (walkout, go on strike) if they were ignored. Conservatives have always opposed unions, but in the past decade they have managed to weaken unions by passing right-to-work laws which have stripped workers of much of the power they once had to act as a balance against the demands of stock holders. The market is doing well, worker incomes are not.

The profits that go to shareholders keep making those who have stocks and those who own businesses richer, and since money equals power, these particular citizens are able to exert a lot of pressure in Washington and can keep getting laws passed that favor those who are already wealthy. Lobbyists, PACS that fund elections, laws like the Supreme Court decision that gave free speech (and votes) to dollars (money equals speech, corporations are people) have expanded the power of wealthy Americans who own stock. And because those who cannot afford stocks know that everyone is hurt if the stock market tumbles they are afraid to oppose even the most outrageous legislation (like the Trump tax cuts) because they don’t know how their opposition will affect the overall economy and their own everyday lives.

The stock market becomes a rocket that delivers more and more money to those who already have it and turns workers into statistics in a global worker market where American salaries already seem too magnanimous. 

If it is the stock market that is responsible for a lot of the economic inequality that exists then do we do away with the stock market? Well, good luck with that. And although this conclusion was reached in the cheap seats, when the question was put to the “Google” it was clear that there are already expert articles which show that economists were ahead on this. It can take longer to draw valid conclusions about money when you have always been in the cheap seats. 

With income, the story is a familiar one of rising inequality. In 1989 and 2016, the poorest fifth had 3 percent of pre-tax family income. But the top fifth of families saw their share of income rise from 57 percent in 1989 to 64 percent in 2016. Put another way, the bottom group’s share remained miniscule, the top group’s share rose by 9 percentage points (or one-sixth), and middle America saw its share diminish.

For corporate equity, we find that the lowest-income fifth of families had 1.1 percent of corporate equity in 1989, and 2.0 percent in 2016 (over the same timespan, the second-bottom quintile share went from 3.5 percent to 1.6 percent, so the total share of corporate equity of the bottom 40 percent fell). By contrast, the highest-income quintile had 77 percent of corporate equity in 1989, and 89 percent of corporate equity in 2016. Hence, corporate equity is considerably more skewed than expenditure or income, and has become considerably more skewed over the past three decades.

Even if the shares had remained unchanged at their 1989 levels, excess market power would have exacerbated inequality, because stock holdings were considerably more skewed than consumption. But because consumption inequality remained little changed, while inequality in stock holdings worsened, the effect of market power on inequality was even more substantial in 2016 than a generation earlier.”

https://www.sciencedirect.com/science/article/pii/S0304387817300858

https://digitalcommons.iwu.edu/uer/vol15/iss1/7/

A solution I like better than trying to close the stock market (which would be even harder than passing sensible gun laws) is for everyone to “inherit” some stocks when they turn 18, or 25, or, even better, at birth – and not risky stock, good solid stock, in accounts they cannot cash in until a real need arises (college, training, buying a house, starting a business) that also will serve as an investment. Medical emergencies would be handled in another way. Then everyone would have a reason to follow the market, to wish the economy well, to learn about investing and to experience an opportunity to have an economic goal and to reach that goal. This would also go far to lessen economic inequality, and reparations could be managed by giving those who have been held back by racial discrimination a larger share in the market.

You can start laughing now – but it could work and it would be so much more peaceful than a revolution.

From a Google Image Search – Giphy.gif