• Dear People Wishing for Stock Market Trouble

    August 26, 2019 // 20 Comments »


     
     
    NOTE: I’ve been re-running this article every time over the last three years a temporary downturn on Wall Street causes progressive idiots to celebrate. The last run was in January 2019, but here we go again.

     
     

    Dear People Wishing for Stock Market Trouble:
     
    Stock market trouble will not make Trump go away.

     

    You can have fun posting memes though! He’s owned! He screwed up the one thing he says he’s good at! Rich people will abandon him! Hah hah!

    First of all, that is not what is happening. But if people want to panic based on panic journalism, by all means go ahead.

    But for the rest of us from 1929 to 2018 the S&P averaged 8-10% gains. It is up well above that for this year, so declines are expected and normal. Recessions on the other hand are CAUSED by things, they do not happen in cycles per se just because it is time. Or because the MSM wants “recession” to replace “Russia” as the magic bullet to end Trump.

    Everything tangled by US-China can be untangled, suggesting its long term effects are able to be mitigated directly. You can spend as much time as you like blaming/congratulating whomever that the fundamentals are strong, but they are and that speaks better to longer term trends than other factors. Even in the short term there is money to be made; if you bought on Friday’s drop you are already making money on today’s rise.

    If you are learning about inverted bond yields roughly the same way you learned about Emoluments and the 25th Amendment and Russiagate, you are still listening to the wrong people.

     

    But let’s look into what progressives are cheering for, hoping to happen, a real live recession. Any serious downturn in markets will cause more economic inequality. Wealthy people depend on periodic downturns to force middle class people to sell. The rich then buy cheap and wait for the inevitable swing back. They end up owning more stuff, and they got it cheaply.

    About half of all American households own stock, in most cases indirectly through mutual funds, and, more and more via 401(Ks) and whatever company pension accounts still exist. Yet despite that broad base — half of us own something in the stock market — the richest 10% of Americans owned 84% of the total value of the market as of 2016.

    Though those numbers roughly match those of America’s worst period of inequality, the so-called Gilded Age, they are a big change from 2001, when the top 10% owned only 77% of all stocks.

    Today, they have more. You have less. Your part of the market exists because the few wolves need lots of rabbits to eat. You are predator or you are economic prey. Guess where this goes? Think of it as one of those pictures where parallel railroad tracks seem to get closer and closer as they recede into the distance. The theoretical end point is one person owns 100% of everything. But modern wealthy would be happy if .01% owned just 99%, close enough.

     

    In case you missed it, that’s what the 2008 mortgage/housing crisis was all about. Middle class people lost their homes when they could not pay their mortgages. “The banks” then owned those homes and you did not. It took a few years and most prices started back up. You in turn now rent from someone who now owns those homes.

    The inequality of net worth, after almost two decades of little movement, went up sharply from 2007 to 2010, and relative indebtedness for the middle class expanded. The sharp fall in median net worth and the rise in overall wealth inequality over these years are traceable to the high leverage of middle class families and the high share of homes in their “portfolio.”

    What that means is middle class people have most of their net worth embedded in their homes, but see most of that “worth” is actually debt (leverage.) When times get tough, they may lose the home because they can’t pay the debt. People rich enough to spend money in downturns buy up those homes. They have extra money to ride out the tougher years until the government bails out the markets like Obama did in 2008. Same story for the stock market.

     

    It gets worse, because you get money by working for wages. Rich people get money through capital gains, basically stuff they buy cheaply becoming worth more over time. That’s why the downturn is bad for you, ultimately good for most of them. It is math!

    If you like math with letters in it, it is written as R > G. All explained here if you want to understand precisely why you are going to be poorer. And as a bonus, be sure to note the part about how in the U.S. wages are taxed at a higher level than capital gains. You can never have too many advantages.

    Note also that until slavery was ended in the United States, human beings were also considered as part of capital. Meanwhile, because rich people pass on their wealth to their relatives, the children of rich people are born rich and unless they get really into hookers and blow, will inevitably get richer. They almost can’t help it. The gap between the 1 percent and the 99 percent must grow. This will create the society reminiscent of the pre-Enlightenment past we are in the early stages of now. You know it from Jeopardy! as “feudalism.”

     
    Downturns are a huge sucking, a redistribution of wealth upward. You’re basically fucked in this process. Poverty is ennobling, so you do have that. Have a nice day!

     

    BONUS: I wrote a whole book about this called the Ghosts of Tom Joad but few people wanted to read it, so this is all kind of a fun secret between us.

     
     

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    Copyright © 2019. All rights reserved. The views expressed here are solely those of the author(s) in their private capacity.

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    Posted in #99Percent, Democracy, Economy

    Poor Folks

    February 24, 2019 // 21 Comments »


     
    A guy on Facebook I don’t know wrote a version of what has become a kind of set-piece article in today’s America. Here’s a portion:

    Losing The War of Attrition or How To Turn Any Normal Person Into A Broken, Angry Radical

    You are one of the millions who are employed at minimum wage. Or you are one of the millions who are euphemistically called underemployed, or you are one of the millions with no job and no prospects. You are retired- how did that happen?- or disabled- why did that happen?- and trying to survive on Social Security.

    You reach a point when you realize that getting ahead is no longer possible. After that you reach a point when you realize that holding on to what you have is no longer possible. Then you reach a point when you realize that replacing what has been lost or depleted is no longer possible.

     

    I wrote a book about this five years ago called The Ghosts of Tom Joad. No one read it. Publishers in the process of turning me down mocked me for writing about “poor people” and seemed surprised there were poor people in America who weren’t black and living in ghettos. Well, hell, then Trump happened. Because people watching a way of life — a middle class existence where the rich have more but we had some — fall away are easy targets for demagogues. Always have been. Because before we dismissed things as whataboutism we used to study them as lessons from history. Other people’s’ mistakes. History shows very clearly this economic game we’re playing ends with everyone but a small handful at the top losing badly.

    I concluded five years ago the game was already decided. Our society was already then like those photos of railroad tracks, where in the distance it seems like the two rails come together in a single point. That point is essentially feudalism, where a tiny minority owns almost everything and everyone else lives off whatever scraps they let us have. Like in the Middle Ages, where everyone farmed for the king as serfs. It’s worse than slavery, because slaves at least know they’re slaves and have the possibility, however small, of freedom. Maybe for their kids if not for themselves.
     
    We are not at the singularity, but we are inexorably headed toward it. Five additional years of data has only made that clearer; five years ago we spoke of the 1%. That number no longer matters. The new figure is .1%, an even smaller group who owns even more.

    And no, none of this is new Because Trump. Since 1980, the incomes of the very rich (the .1%) have grown faster than the economy, for about a 400% cumulative increase in wealth. The upper middle class (the 9.9%) has kept pace with the economy, while the other 90% of us, the middle class and the poor have fallen behind.

    By the way, it is these numbers which sent Barack Obama and Hillary Clinton during the 2008 campaign to both use $250,000 as the upper limit of the middle class. They sounded misguided, but it was sort of true. They just were still lumping what we’re calling here the “Upper Middle Class” and the “Middle Class” together. Just words. At present in the U.S. we have three-and-a-half classes: The .1%%, the 9.9%, everyone else hanging on, plus some people way at the bottom with basically nothing.

    But bad news for the 9.9% Since the they the most (the most the .1% does not yet have) they have the most to lose. At their peak, in the mid-1980s, people in this group held 35% of the nation’s wealth. Three decades later that had fallen 12%, exactly as much as the wealth of the 0.1% rose. And do understand the people at the top are constructing walls and throwing nails off the back of the truck to make sure no one can catch up with them. The goal of .1% is to eliminate the competition, the 9.9% below them. They’ll only effectively have it all when the ratio is down to two classes, the .1% and the 99.9%

    We are kept in place via shiny objects (500 channels, more movies and Apple watches and drugs!) and curated divisions. The ever-increasingly sharp lines between say blacks and whites are a perfect tool. Keep the groups fighting left and right and they’ll never notice the real discrimination is up and down. Some groups just found down earlier and harder, but as long as a poor white man in south Kentucky thinks he has nothing in common with a poor black man in the South Bronx they will never work together, never even see the massive economic forces consuming both equally. Forces are even now hard at work to tell us the Republican party is for whites, POC head Democrat, and any third party is a Russian shill in place to hurt the candidate you favor.

    Whether your housing is subsidized via a mortgage and that tax deduction or Section 8, you’re still on the spectrum of depending on the people really in charge to allow you a place to live. I do not see a way out of this, only maybe steps that can slow it down or cause it to speed up.
     
    Very short version summary: People like you and I fell through the cracks; we weren’t supposed to end up here but the .1% hadn’t worked out the details so they got as much as they do now and we basically ended up with bigger crumbs than we should have, especially me lucking into a “career” with no real skills.

    Our own kids may do OK with what we leave for them, but only if your son is a medical doctor will he have a decent shot at our lifestyle and only because of the “cartelization” of the profession by the AMA. The rest of our kids are unlikely to have any shot at what we ended up with.

    Sorry, I’m not a more cheerful guy but these conclusions are based on a fair amount of honest study.

     
     

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    Copyright © 2019. All rights reserved. The views expressed here are solely those of the author(s) in their private capacity.

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    Posted in #99Percent, Democracy, Economy