A few things dawned on me as I was listening to the latest tout on some financial news network talk about impending doom in the markets. First, I realized what makes a market efficient is the plethora of voices. This moves the market in at least some sense of order and parameters…most of the time. But I also realized how most of this noise is plain and simple branding. It really doesn’t make all that much difference whether or not you’re correct. I mean, come on, look at Alan Greenspan or Nouriel Roubini. The latter, because one of his many predictions actually came true — the housing implosion, has been self-branded an expert. And the many financial news/gossip media needing to fill space and time have been more than willing to present him as such. FOR YEARS NOW he has predicted a collapse of the stock market. Wouldn’t it be great if we mere mortals could make a living being so very wrong? Sooner or later, the market will take a hit. Maybe tomorrow or maybe when the Dow hits 20,000. Take a guess, Nouriel. Or maybe Alan will know, or maybe not.
The other thing I realized is how the market doomsayers parallel the budget hawks. In this time of healthy corporate profit and the massive increase in wealth for the highest earners, producing an ever-increasing income gap, the budget hawks want to cut corporate taxes and cut entitlements. Really? Forget the humanity involved in the equation. Rather, think of the futility of budget hawks’ economic thinking. First, corporations don’t really want a tax decrease. Why? Because many of them would pay more. The bottom line is that many of the biggest of the big — Apple and Google come to mind — want to keep the ridiculously complex (and advantageous to them) tax code. They know that the effective tax rate today is far less than a reduced rate in a simple, transparent tax system. Corporate profit has been very strong. It’s time the playing field is level for all corporations.
Entitlements. Someone gets food stamps. Stores get paid. Farmers get paid. People eat. People of limited means have more more money to purchase things, from medicine to clothes to an education. If the economy has transitioned, which it has, to a huge percentage of the population not being able to find work (forget the unemployment rate — terrible at over 7% but not even close to the whole story), the animal spirits and the economy need to be stoked. Budget hawks want to do the opposite. Somehow they feel that corporations having additional billions of dollars will do the trick. Currently, there are hundreds of billions of dollars in corporate coffers doing almost nothing. Budget hawks want to add billions to this dormant fund, as if this will magically fire the economy. Imagine if this same amount of money was put in the hands of those on the wrong side of the income gap. In which situation do you think the money would get churned faster and more efficiently?