DEMOCRACY AND TRUMP

The political experiment called democracy (actually a constitutional republic because in a true democracy the head is elected by the people not electors) is in peril.  Let us assume the basis for our economic system is Capitalism (defined as having both a political and economic component).  In terms of a free market economy and macro-economic theory, savings equals investment.  In the United States, savings rates for individuals is practically nil (50% of households have less than $400 in savings). 

The U.S. individual investments are in equities, which are not savings per se in that they are subject to both gains and losses.  Therefore, the savings component of our economy is controlled by Corporations, in lieu of banks and savings and loan organizations.  90% of all stocks are controlled by only 10% of the people (this is due to mutual fund ownership).  Corporate stock ownership is a risk investment in lieu of savings, which is insured by FDIC.  The savings held by banks are used as the base for investments.  

The risks involved in equity trading, in both gains and losses, are known by the investor.  It is lunacy to prop up corporations with taxpayer monies such as grants. Foreign ownership is 40% of U.S. corporate equities of listed stocks and bonds.  Taxpayers not the corporations will pay the debt. 

The political socialistic capitalist Donald Trump has prioritized corporate welfare during a pandemic and daily holds a press conference that is revenge and grudge matches with self-congratulatory remarks and sucking up by his cronies.  Trumps actions guarantees his cronies will only experience gains and not suffer any losses, and those losses will be a burden on the taxpayer not the corporation or the foreign investors. 

Foreigners invest in the U.S. with monies derived from the trade imbalance.  Does corporate welfare help or hinder the imbalance?  Who does this welfare help is it the top 1% and foreign investors?  With corporate socialistic welfare the rich get richer.  All welfare should demure to the individual, not corporations, since individuals will ultimately pay a price.  Risk equity investments are just that, risk.  By the government picking winners and losers the market will not be the same.  Once a sector of the economy gets bailed out, the consumer suffers. 

Take the oil industry. They have billions in assets.  Oil is at $3.00 a barrel and in some markets they are trying to give oil away due to lack of storage capacity.  At $3.00 a barrel gas should be $0.25/gallon or less.  It takes oil to be at $40/barrel for U.S. oil companies to profit from operations.  The U.S. production is virtually shut down.  The demand has dried up.  No travel and no one is buying gas, and airlines have cut all international flights.  Should the taxpayer pay the $37/barrel differential due to lack of demand, so the oil company with billions in assets can be made whole? Today’s closing price was negative $37/barrel.  Where is the Donald now in getting producers to pay the U.S. $37/ barrel to restock our strategic reserves?   With corporate welfare, where do you stop?  Restaurants will suffer for years any venue where close contact is inevitable will not be back to normal without testing and a vaccine will the taxpayer continue to support failing venues until a vaccine is available?  Trump has already allowed 100% write-off for losses for businesses. 

In my opinion, the food stamp program should be expanded to include those on unemployment and also In lieu of corporate socialistic welfare give money to local governments and have them purchase gift cards from the small businesses in their city and distribute the cards to the individuals that get the food stamps, to supplement the food source and support the local community.  The food stamp program has guidelines in place to qualify recipients, and provides a means to get businesses operating and have those who will repay the debt benefit.  The cards could have a limit on the time the individual can redeem.

The contraction in the economy may take on the look of other developed countries with individual medical coverage being closely examined.  With 20-30% unemployment and insurance tied to your workplace anyone unemployed for any long period is screwed.  The contraction is inevitable in the service industry.  Currently 40% of workers employed are service workers.  The service sector is only 25% in most other developed countries. 

We in the U.S. are consumers first and will see a contraction in the service industry.  Movies, restaurants, bars, sporting events, concerts and other venues are going to feel the pinch for years.  Do we continue to bail out individuals who will suffer for years with less than full employment?  Due to on line shopping and the convenience of delivery, malls that were marginal prior to the pandemic are going to be bailed out even though they were failing anyway?  Corporations have assets, which they can borrow against.  Most people don’t have the luxury of assets to cover expenses in case of an emergency. 

I predict soup kitchens, poverty, homelessness, home loss due to medical expenses without insurance, sporting events with sparse or no crowds.  Theaters with limited seating.  All venues will have temperature testing prior to entry.

The oil market dollar crash was a predecessor to other economic down-turns so hang on the worst is yet to come.

Have a happy day!

The daily grouch