I want to continue my thoughts from yesterday about the possibility of another economic crisis ahead and what President-elect Donald Trump could do for the poor and middle class.
For starters, I’m going to state two things that will make Conservatives and Liberals cackle and become pissed — not necessarily in that order or at the same time.
Trickle-down economics is a poor person’s fantasy and a sycophant policymaker’s sham. Even one of the most notorious architects of President Ronald Reagan’s version of “Give the rich more and the poor will also get more” admits to the bamboozle.
The Federal Reserve’s monetary stimulus strategy during President Barack Obama’s two terms in office smacks of trickle-down tricks.
And if I wasn’t more clear, allow me to state that trickle-down economics doesn’t work — at least not for everyone who isn’t rich.
Are you pissed-off yet?
You should be. But not at me. I’m simply stating the way the game has been constructed.
The confluence of quantitative easing, relatively attractive capital gains tax rates and no clear or compelling alternative investment options for the rich to put money caused the post-Great Recession stock market to soar.
Meanwhile, the wealth disparity between the rich and everyone else grew while middle class wages decreased.
Quantitative easing is the best example of how the wealth game played by the government and banks is so insanely lopsided that you begin to wonder if any laws were broken.
Using nearly-free money provided by the Fed, banks bought Treasury or corporate bonds, only to accept the Fed’s offer to buy these assets at a premium.
With such easy access to free money and the ridiculous profit margins to come from it, why would banks have any motivation to stretch beyond Wall Street to help Main Street?
With the resulting stock market performance reaching toward new highs, what would motivate rich folks to meddle with opening shoe stores or build plumbing parts factories?
Rich folks aren’t stupid. They know the middle class looks worse today than in 2006. In other words, who would open a shoe store when there are fewer people in a comfortable position to buy stuff?
Further, current economic policy doesn’t encourage new business creation. It’s been that way for years.
Therefore, all the loot made on Wall Street since 2009 stayed there.
Yeah, I know — “[Yada yada] low unemployment … [yada yada] … ”
You should know by now that the way unemployment is calculated neglects to account for the massive number of engineers, managers and factory workers who have been without a gig for so long that their unemployment benefits ran out. Their situation is so ugly that they cease to even become a statistic through the US government’s eyes.
In addition, wages are still too low. Time to snap out of that recovery dream.
Let’s go back to the Fed rate hike I mentioned yesterday. If the poor and middle class couldn’t elevate much beyond flatline status with low interest rates, what makes you think they’ll live a breezy life with HIGHER rates?
They likely won’t. I haven’t yet seen a study that shows how higher interest rates lead to higher middle class wages and lower unemployment.
And since the economy still has a high dependence on people buying or producing something …
This is where Trump comes in. The Fed has played the same monetary stimulus music for the past seven years and spent more than $3 trillion on bank asset facilities along the way. It’s time to get creative.
Like — creating a debt process which supports small business creation. The Fed could repurpose the projects it used to resuscitate banks during the Great Recession to revive Main Street.
Trump could also create tax incentive policies that encourage investment alternatives just as compelling as the current financial markets scheme.
You can’t tell me “There’s no money for this” — especially after we’ve witnessed three rounds of QE.
An aggressive infrastructure program, designed the right way, is a no-brainer. (Laughing) And since Obama won’t be around next year for the Party of No Brains to loathe, it’s hard to see an infrastructure bill proposal fail in Congress.
Trump will have to think of something soon. Higher interest rates and other adverse factors won’t work in his favor …
song currently stuck in my head: “hating” – eight bells