The Kennedy assassination, September 11, the COVID epidemic… Sometimes events are so beneficial to the ruling elites that one can almost wonder if they did not provoke them.
Finance professors are legion. Their theories are usually shallow and wrong…or weird and stupid. We are not sure which category Professor Richard J. Murphy of Sheffield, England falls into. We doubt his main thesis about the coming crash is correct, but it is provocative.
At first glance, Murphy seems to be even more cynical than us. He believes Donald Trump is intentionally proposing stupid economic policies to sink the American economy.
Everyone knows that restricting trade is bad policy. It prevents people from getting the best product at the best price, and it allows uncompetitive – but politically well-connected – domestic companies to remain in business long after they should have been liquidated.
Threatening foreign countries with sanctions if they use currencies other than the dollar is another bad idea. It’s like losing a little league baseball game, and threatening to take the bat home. The aliens will eventually find their own bat.
And there is the threat of expelling millions of workers. Add these deported workers to the $2 trillion that Musk and Ramaswamy say they want to reduce from the federal deficit and the price hikes caused by tariffs… All coming just as the stock market is reaching bubble highs…
And you have set the stage for a catastrophic collapse.
CNBC reports:
“SoftBank and President-elect Trump announce $100 billion investment in the United States over four years”
Yes, the money is flowing. Soon, jobs will be created. Or not.
But Murphy thinks Team Trump’s real plan is to collapse the economy:
“Is the possibility that the global economy will collapse soon a reasonable probability? Yes. And the reason can be summed up in two words: Donald Trump. »
How so ? But what is happening…?
Murphy explains his analysis. There have been two huge bailouts in the last ten years. In 2008, a huge bailout of Wall Street was organized by Ben Bernanke and Henry Paulson, former US Treasury Secretary. Then, in 2020, the Trump White House held another one. In each case, it was the middle classes who suffered the losses… and the rich who pocketed the gains.
Not all estimates agree, but the mortgage crisis of 2008 and the lockdown fiasco of 2020 cost as much as $20 trillion.
But for the financial asset-holding elite, Murphy says, the bailouts that followed more than made up for the losses.
Murphy’s hypothesis is that the feds intentionally provoke the crises and use them as cover for bailouts, which make the rich richer.
And this is where it gets interesting.
Although we are cynical, we doubt they are so calculating. The idea of “malicious intent” seems unlikely. But the forces of history exert their own pull.
The Reichstag fire, the Kennedy assassination, September 11, COVID… It sometimes happens that events are so beneficial to the ruling elites that we can indeed wonder if they did not provoke them.
The American financial world is made up of two parts. There is the economic part – the real-life economy, where people work, save and invest, always trying to offer better products and services, in order to earn more.
And there is the financial part. It is assumed that Wall Street serves the economic side, allocating limited resources to projects that require it. But when the Fed pushes real interest rates to extremely low levels, it confuses the signals. Resources are no longer scarce. Actors then stop trying to carefully allocate funds to the real economy.
Instead, they borrow cheap money for gambling, buying back their own shares, for mergers and acquisitions… and for anything else that is profitable. Cryptocurrencies, AI… one fad after another… The sky has no limits.
“Since 2008, the investor class has become richer than ever… while the real economy lags and falters. What happened? National wealth shifted from individuals in the real economy who earned it to hedge fund managers, speculators, and people who made money, not by offering goods or services to other people, but thanks to misvalued money. »
Wall Street resource allocators have not allocated resources to manufacturing. Wages have not increased. The factories were not built. People have not been trained to produce new goods. And every mother in the country wanted their children to grow up to be hedge fund managers, not factory managers. That’s where the money was!
Over the past four years, real incomes of real people in the real economy from jobs and products have remained stable or declined. But during that same period, the net worth of the top 1% increased by $16.5 trillion (these numbers predate the Trump bump). Each household in this group is about $13 million richer than it was four years ago. As for the bottom 66 million households, they gained only about $28,000 each in wealth.
Federal policies caused the real economy to collapse, then pumped money into Wall Street. If we take the Dow Jones as a measure, it was trading at 28,000 in January 2020. Today, it is at 44,000. The value of American stocks, roughly speaking, has increased from around 40 trillion dollars in 2020 to nearly $60 trillion today. This $20 trillion is roughly the amount removed from the economy by the 2008 and 2020 crises.
