The triumph of the stock market.

[Senior citizen]

In the old Soviet Union, under Communism, there was no stock market. When the Soviet Union fell, a stock market was established. Everything that had belonged to the state was privatized and shares were sold. The really good stuff went to a handful of oligarchs and instead of developing their property, they chose to strip the assets and stash them overseas.

When the stock market crashed millions of Russians lost all their savings. Banks closed and ATM and debit cards no longer worked. Pensions disappeared and the ruble lost most of its value. Unemployment rose and the stock market lost 90% of its value.

Are the millions who died, those without enough to eat, those whose life expectancy has been shortened, those without healthcare or jobs in the new, privatized, deregulated, free trade Russia grateful? No, they are not. Are the U.S. firms who made billions in profit from this scam grateful? They certainly are. They'd like to spread this system to every place they can, particularly if it has oil or gas.

Deregulation, privatization, globalization, it all means the same thing: the rich get hugely richer, and the poor get hideously poorer.

There was a thread noting that the U.S. stock market had risen after the debate. Democrats seem to have more fiscally conservative policies and their economies seem to prosper. I find that frightening. Are we producing more? Do we have more jobs? Are pay scales rising? Yes, President Kerry may end or at least limit some of the outright corporate theft that has been going on (Enron, etc.), and can reduce the deficit spending that has been futher enriching puke fat cats, but that only slows the process, it doesn't stop it. Kerry's plan to stop rewarding companies for exporting jobs is terrific, but a company that has laid off thousands of workers here and now has plants in China and Mexico, isn't going to bring those plants back just because they lose a tax break.

We need reregulation, new, stricter, enforceable anti-trust laws, stronger unions, and federal support for workers' cooperatives. In the long run, we might even be better off if the stock market crashed, so that we could get the "new deal" reforms we need. If companies are legally considered to be persons, why can't the stock market have a living will? The choice is to keep it on life support or to pull the plug. How much suffering is enough? What kind of system makes billionaires out of CEOs to reward them for exporting jobs and slashing wages? Why did some of those billionaires renounce their U.S. citizenship to avoid paying taxes? Why should a stock increase in value if the company it represents shares of, is contributing less to our economy than before? Do all the people who lost their jobs and pension plans and market investments really think that it was just a little "tick" and that the system itself is just peachy? Do they really think they'll live long enough to see the "upturn" their broker assured them is just around the corner? And what do they have left to invest if they did?

The stock market has triumphed. It destroyed any possibility of democracy in Russia, and has destroyed most of the strong middle class that was the bulwark of democracy here. To me the choice is clear. We can have oligarchy (the stock market) or democracy, but we can't have both.

So tell me where I'm wrong and what I don't understand, please. This is one of those times when I'd really like to be wrong.

[punpirate]

1. I think you make a central misjudgment...

... that many people do, and that is that the economy and the stock market are intimately linked. They aren't. Many people don't work for nationally-traded corporations.

That said, a return to regulation and some serious attention to anti-trust law is preferable to accelerating toward a laissez-faire market propped up by government tax breaks, tax credits, government grants to corporations and increasing opportunities for crony capitalism (which has reached an all-time high in this particular Bush administration).

You'll never stop the trading of publicly-held stock, but what government can do is de-emphasize its obsession with that segment of the economy, put more tax dollars to work stimulating local businesses. Some very good examples of why that needs to be done and how it can be done are here:

http://www.goodjobsfirst.org/

Not easy, particularly when the election system depends so heavily on money from corporations, who then expect to be listened to more carefully than the public. It still comes down to who we vote for, and whose interests those elected obey.

Cheers.

[Senior citizen]

2. Wow, great site link! Thanks, punpirate.

Good Jobs First is a goldmine. Just added it to my favorites.

I guess the incorrect assumption that the economy and the stock market are intimately linked shows that I've been drinking the media Kool-aid. I mean, I don't own stocks or watch the market, and I pay very little attention to the media, but whenever I do turn the radio or TV on, it seems like I have to get past somebody reporting the stock market just to find the station or channel I want.

Do we actually have two economies, one that would crash if the stock market did, and one that wouldn't? One of the things that frightens me is that I think we'd have a harder time now if we had to weather a depression, because we have fewer small farmers than there were in the '20s and '30s. And bigger cities and a lot more people.

But now that I think about it, there was a downturn in the stock market some years back (was it '89?), and I only ran into one person it impacted on--a Vice President at my credit union. So the corporate media mantra that a majority of Americans are invested in the stock market, at least through their pensions and mutual funds, might just be a slight exaggeration?

[punpirate]

3. That's a good question...

... that I'm not sure I'm the one with the answer. To some degree, there are two economies (maybe more) out there, but they are interconnected to a degree. In some of the obvious ways, some people would have trouble with food, gas, etc. because those commodities are tied up with large national firms, so the suggestion that the lack of small farmers might have an effect is true, to a point.

What happened in the Great Depression was as much a problem with banks as with the stock market. With banks allowed to invest in the market, and to loan to people buying on margin who expected to pay the loans back with stock market profits, the market crash caused a run on the banks. New Deal legislation plugged that hole, but recent so-called banking reform is allowing it to happen again, to some degree.

That said, markets rarely disappear entirely (although some have), even when there's a crash. The people hurt the worst are the ones who are somewhat wealthy (your example) and those trapped in it for their retirements (the Enron example). Most working people are minimally invested in stocks and aren't dramatically affects by changes in it.

The market wants us to believe that we're all equally invested in it (through tax-deferred mutual funds and 401(k)s, etc.), but here's a little statistic that's worth considering in all the hype. The top 400 families in the country own a little over 30% of all the stock in the country. The top 1% of the people own over half of it. The top 20% own over 80% of the stock. And most of that bottom 80% with the remaining 20% have very little control over the investment of their funds--it's controlled by the companies for which they work, or by fund managers far away.

What the very wealthy can weather comfortably wipes out the marginal investors.

Where the great danger comes in a severe downturn in the market is in those areas where public funds have become privatized, or otherwise made more fragile by deregulation.

Cheers.

[Senior citizen]

4. Okay, I had my flu shot Thursday, & I'm a little sluggish.

Edited for typo.

But let's see if I can plow through this.

The top 400 families are cool. They have overseas investments and lots of money stashed in offshore bank accounts. Our stock market can collapse and they might find it annoying, or they might see it as a great opportunity to snap up most of the 60% they don't own at pennies on the dollar when the market hits bottom.

The top 20% must include some of those marginal investors, whatever they are. People who bought stock on borrowed money expecting it to go up? People who invested more than they could afford and would be ruined by a crash? People who don't have most of their liquid assets overseas already?

The bottom 80% aren't living off stock dividends. They were hoping they'd have pension plans, but can survive so long as they have jobs and are able to work. But if the market crashes, I assume that many of their jobs would disappear as companies went broke.

But the big danger is when deregulation lets banks (Silverado) and corporations (Enron) steal people's money, or if we put Social Security money into the stock market. Well, Social Security is in trouble already. We have fewer wage-earners per retiree, and those wage-earners are making less money. And I wouldn't be surprized if President Kerry walks into the Oval Office and find a note from the chimp on the desk that says, "Sorry, John, ol' buddy, ol' pal, but I gave what was left in the Social Security lockbox to Halliburton so Dickie wouldn't be mad at me for losing. If you ever need anything you know you can aways count on a fellow Bonesman. I'll be in an undisclosed location, so just holler."

Okay, I don't get it. In a severe market downturn (crash), average Joes lose their jobs and their savings, marginal investors get wiped out, but the oligarchs do just fine and, uh, that somehow means that our economy isn't intimately connected to the stock market?

Oh, right. You said that a lot of people don't work for listed companies. But what sort of companies can survive a depression? There aren't too many things you can sell when most people are broke. I think movies did well, so I'm sure casinos would too. In fact, I've been predicting for several years now that when the stock market crashes, the gaming tribes will be able to buy the country back for a sum that, when adjusted for acreage and inflation, is in line with what Peter Minuit paid for Manhattan.

[punpirate]

5. Well, the business about Social Security issue...

... is of concern. Leaving aside the money the Bushies have already borrowed from it for just a moment, the latest I heard was that SS was solvent and healthy through 2046 (estimate upgraded from the previous estimate of 2038).

Now, about that lockbox. All of the budget shortfalls advertised by the Bushies are less the amount borrowed from the SS and Medicare trusts. That is money loaned inside the government, not to foreign or domestic lenders. The only way the government can default on that internal debt is by a revision of SS law and internal administrative law. Quite possible under the Bushies, quite unlikely under a Democratic presidency.

It will take some time to get that total debt under control, and it means undoing the tax breaks for the wealthy, which Kerry has said he intends to do.

Now, I'm not suggesting that there would be no hardship due to a stock market crash (a really big one), just that I don't think it will be as severe as last time, mainly because there are still some New Deal provisions in place (in the case of banks, FSLIC is still there, for example).

And, as bad as the Great Depression was (and it was brought on not just by the stock market crash, but by Hoover's insistence on raising taxes on the middle class instead of the wealthy), unemployment was around 18% at its peak. Moreover, the country managed to climb out of that bad situation, largely by some sensible government policy and programs such as the WPA and the CCC, which got some money moving again.

If there's a definite crash in the market, make no mistake, it will hurt people, but not as badly as the Great Depression did. Then, a lot of ordinary people were heavily in hock to cover stock purchases, and for about a ten-year period, all they saw was the market skyrocketing up--they couldn't lose money by borrowing. When the crash came, they couldn't cover their loans, the banks couldn't cover the loans made, and that caused the bank panics. Even people who had money in the bank couldn't get it out. With no money in circulation, deflation set in, and the situation became much worse than it would be today.

And, what happened? The country still recovered. It just took longer than it should have because Hoover was around for three years after the crash.

Just the way I see it, so far. How well the country recovers from a crash is going to depend heavily on who's running the government and what economists they're listening to.

Cheers.

[Senior citizen]

6. So it seems like a question of timing then.

If FSLIC was to try to bail out failed banks before the deficit was cleared up, wouldn't that cause horrific inflation?

Obviously the rich are aware that Kerry would do away with their big tax break, and I'm sure they're prepared for such a contingency. You can't count on those who benefit most from this country's economic policies to contribute anything. Some will, most won't.

The way I see it, there's sort of a cycle. The pukes get us into debt, then the Dems work hard and pay it off and even make a surplus so that the pukes can rob us blind again, rinse and repeat. Not that just because they're all in that 400 families group, went to the same schools, belonged to the same frats, are all Trilateralists, etc., etc., that there's any conspiracy or anything. Just a dreadfully repetitive economic cycle. Curiously enough, it seems to coincide with our overpopulation cycle. Peak population, peak oil--I'm starting to feel a bit peaked myself.

Been fun, pun!

:toast: :yourock: :hi:

[punpirate]

7. Well, we more or less...

... bailed out the savings & loan system from the late `80s to the early `90s, mostly by accruing debt (of course we benefitted from having Republicans in office in one sense--the Fed kept interest rates low, which minimized some of the effect of that). Funny, someone did a study of Fed interest rates since Greenspin took over as chairman and rates always stayed too low during Republican administrations and started climbing when Democrats got in.

Well, that notion of a broad cycle is true for the last twenty-four years, certainly. One thing for certain, the wealthy have gotten a lot wealthier with the recent crop of Repugs in.

Cheers. Chase that flu away. :toast: