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[flagged] The booming stock market shows America is diseased (theweek.com)
44 points by paulpauper 8 days ago | hide | past | web | favorite | 23 comments





I have a theory that another reason the stock market and property values are growing so fast is that they're basically the only things that the upper middle class can invest in, so most of the money that well off people save just goes to pumping up the valuation of a couple different asset types that haven't actually changed in their fundamentals that much.

Upper middle class people can't really do venture capital or private equity (well, they can if they get accredited, but these also require a lot more knowledge and time), bond yields and interest rates are so low, and our retirement system essentially requires chasing inflation-beating yields to work, so they have no choice but to participate in bubbles.


Do you have any data to support this? I ask, not to challenge the idea, but because I share the same suspicion - that the supply of investment dollars that go into the market independent of its underlying fundamentals continues to keep prices strong (particularly now that 401K plans have replaced pensions so a lot of dollars go into the stock market each pay period automatically). If everyone views the stock market as the place to save for retirement, rather than evaluating it as an investment per se (relative to other asset classes), then the overall stock market will continue to perform well, even if the active trading of mutual fund managers causes certain stocks to rise or fall relative to one another. I haven't, however, seen any hard data to support that suspicion.

Retail investors don’t drive stock market trends. It’s the Fed, institutions, and companies themselves.

Well known the Fed is pumping liquidity into the market for last few months through the Repo market. Plus cutting the Fed rate twice last year since the recession.

Companies are engaging in stock buybacks. When there’s fewer shares in the market the share price goes up.


Does the money I put in Vanguards 20XX retirement funds in my 401k count as retail? Because I assume across all the different flavors/providers of that, it adds up to quite a lot

Counter-evidence: the P/E ratio of AAPL has remained pretty steady as the stock has gone up by leaps and bounds:

https://www.macrotrends.net/stocks/charts/AAPL/apple/pe-rati...


The problem is the federal reserve and fiat money system.

I don’t get it. Reading this article it almost sounded like satire. Stock market goes up, in a quality grows greater. Black market goes down, inequality worsens. It’s as if the very concept of a public company is hated which begs the question: Is there any society where a free stock market does not exist that can hold a candle to the generally improved standard of living for everyone??

That's not at all what the article says. Naturally, it is good that the stock market goes up, i.e., the values of the companies goes up, if it's because of improved performance. The author argues the stock market is increasing more than it should based on increased inequality between the economy participants (stock holders, customers and employees), where one class of participant seem to be taking the biggest share of the pie. The author argues this creates a bubble situation that can lead to depressions.

Its astounding how quickly people can forget the mistakes of the past, or pretend that they didn't happen. The foundation of a thriving civilization is learning from past mistakes and taking action to avoid the same mistake.

The bad faith arguments for trickle down economics and the myth of tax cuts automatically generating enough economic growth are just that: myths, that have been debunked.

This is what makes me especially excited for the possibility of a Warren/Sanders Administration. Republicans will run the economy to the ground; we need a player in the economy that is concerned not just with short term profit maximization but long term investments in society.


  trickle down economics and the myth of tax cuts automatically generating enough economic growth are just that: myths, that have been debunked.
I'm just heading out the door, so I apologize for this being a very lazy reply. But does anyone have any semi-academic reading (I'm not an economist..., but I don't want pundit talk) that thoroughly debunks these points?

“tax cuts automatically generating enough economic growth”

This one is easy to debunk. Deficits have gone up with every tax cut since Reagan and they never came down much. Trickle down also doesn’t seem to work with upper incomes rising while lower incomes are stagnating.


But you're one step removed.

Deficits are income minus expenditures.

If expenditures are increasing faster than income (regardless of how fast income is growing), then there will always be deficits. A better measure would be to look at income (aka tax revenues) which usually come from productive economic activity.

Your analysis is closer "eating vegetables makes you fat!" while ignoring that you're eating three desserts after each meal.


Trickle down economics was coined in a depression era joke by Will Rogers.

You might want to start your reading with this very widely reported 2015 IMF report: https://www.imf.org/external/pubs/ft/sdn/2015/sdn1513.pdf

First article about this report search brought up, in case you want a slightly lighter introduction is, though you should find dozens of other media articles on the report: https://psmag.com/economics/trickle-down-economics-is-indeed... Never encountered this site before so know nothing of their editorial stance, though I can conclude they are not pushing the boundaries of the laissez-faire right. :)



Not replying but questioning your question - why isn't the results of multiple attempts at tax cuts at state (Kansas) and federal level(Reagan/Bush/Trump in USA) enough evidence, would someone in favor of such tax cuts be coming at the facts with something like "No true Scotsman"? All of the top matches for stories about tax cut results end up on progressive or non libertarian sites. The architect (maybe the author for the textbook on Reaganomics) for trickle down tax cuts wrote an editorial which is not academic but still: https://www.usatoday.com/story/opinion/2017/09/27/tax-cut-fe...

Because every major tax cut, except George W Bush's lead to an economic boom that people felt. Kennedy, Reagan, Clinton, Bush, and Trump all pushed through major tax cuts. Each time it was followed by economic growth (except W).

Now most economists (including a recently published and definitive 65 year study of tax cuts) will tell you that those tax cuts did NOT cause the economic growth.

This is a case of academics fighting what people saw with their eyes and felt with their pocket books, so this argument will never die no matter how many papers are published "debunking" it. I have a hard time believing the economists myself having lived through all but Kennedy's tax cut, but it may be so.

Also, the person above was not talking about trickle-down, which is easier to debunk. I would definitely agree it is pretty clear that in most all cases the rich get richer when taxes are substantially lowered and very little trickles down. Trickle down is easier to "disprove" than a connection between tax cuts and growth.

Kennedy's tax cut and resultant economic growth appeared to help the middle class more than the others, but that was before we went off the gold standard and productivity and wages rose together.

And yes what happened in Kansas is sad. You can have very low taxes, but without something to attract talented people and businesses to your state, they don't do much good. No one is going to relocate to the middle of nowhere just to enjoy a modest tax benefit, and if you are a corporation you will likely just incorporate in Delaware anyway so why bother with Kansas?


Tax cuts are like drugs. Immediately after taking a hit things look and feel good but they won't last. Either you stop before they kill you and you get a hang over or you just keep upping your dose until it kills you. Eventually the piper gets paid.

> Its astounding how quickly people can forget the mistakes of the past, or pretend that they didn't happen.

> This is what makes me especially excited for the possibility of a Warrens/Sanders...

My friend, I’d like to suggest some historical reading about the dangers of central planning, socialist/communist governments....


There is quite a bit of gap between Grover Norquist style economic policy and central planning. Neither Sanders or Warren are advocating for central planning. George H.W. Bush famously called trickle down economics “voodoo economics”. Prior to the great shift rightward with Reagan most Republicans did not advocate for trickle down and Reagan himself thought the tax on capital ought to be greater than the tax on labor.

Hmm...the 'socialism' of Warren/Sanders is the social democracy of such hellholes as <checks notes> most of Western Europe, including Germany, Denmark, Norway, Sweden, Finland, etc.

https://en.wikipedia.org/wiki/Social_democracy


I’ve been thinking that it’s weird that if you think a company has good chances of succeeding and you want to benefit from that, the canonical way to do it is to give money to someone outside the company in order to buy their share of the company.

Like, wouldn’t I prefer that money to go towards the actual funding of the company’s projects?

I’m not aware of any form of “investment” that allows a casual investor (someone who isn’t a millionaire) to actually deploy that capital towards production.


> Like, wouldn’t I prefer that money to go towards the actual funding of the company’s projects?

The problem is that this would make the company too responsive to the needs of investors rather than its markets.

The corporations power is delegated via its shares but its value is derived from the markets it serves. It’s in the interest of shareholders (who passively invest in it) for the corporation to judge projects based on what the markets think are valuable. Neither the corporation nor the shareholders know exactly what that may be, but the corporation spends more time and effort trying to get a good answer than the shareholders do. So the shareholders leave everything beyond the most drastic decisions (sell, close the company etc) to the corporation.


You can do this, but only when the company is issuing new shares, which they do sometimes.

Otherwise, when buying shares, someone in the distant past did invest into the company by buying shares they issued. You are just taking over their share of the company. Which makes you now the one who provides equity to the company.




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