Dow Jones
Jenn and I took a long ride in the truck yesterday, to check out a pole vault pit in Northeastern Ohio. Along the way we listened as the “old fashioned” indicator of the stock market, the Dow Jones Industrial Average, fell almost 1000 points. Like almost everything else today, “1000 points ain’t what it used to be”. I remember teaching about Black Monday and Tuesday in 1929, the beginning of the Great Depression. The Dow lost over 60 points in two days, the mythical “jump out of the 40th Floor window” time on Wall Street. But 60 points was 23% of the market value back then. That’s 9000 points on the Dow Jones today.
Thank goodness we aren’t there yet. But the markets lost trillions of dollars in value yesterday, and that’s not a “good thing” for most people. In our era, most Americans are directly or indirectly invested in the market. Got a 401-k retirement plan at work? You’re in the market. Got a full pension plan? You’re in the market. Retired and collecting a government or teacher’s pension now? A significant portion of the money “backing” your pension is in the market.
We’ve been through market “disasters” before. Less than five years ago, the Covid pandemic caused a market crash, dropping by over 10,000 points and losing a third of its value. And many Americans remember the housing bubble crash of 2008, when the market lost half its value. But this particular economic disaster today is fully man made. And that man’s name is Donald Trump.
Biden’s Gift
Joe Biden handed Trump a booming economy. The markets were at record breaking levels, with the Dow Jones over 45,000 (it closed yesterday at 38170, down 16% in just four months). Unemployment was down to under 4%. And the bugaboo of the Biden administration, inflation, was finally back to under 3%. Sure, prices skyrocketed for a while under Biden’s watch, the results of Covid supply issues and the Government programs that “carried” many Americans through the Covid employment crisis. But prices not only stabilized, but were going back down on most goods. And meanwhile, wages increased almost to match the “flow” of costs.
All Trump had to do was keep his hands off the economy, and let the “Covid recovery” continue. Instead, to use a couple of worn out phrases, “he upset the apple cart”, and “threw the baby (the economy) out with the bath water”. And he did so because he subscribes to an arcane theory of world economics, one that Trump acknowledges comes out of “America’s Gilded Age” of the 1880’s and ‘90’s.
The “Gilded Age” was really only “gilded” for industrialists. It was the age of Andrew Carnegie, John Rockefeller, JP Morgan, and Cornelius Vanderbilt. They were men of enormous wealth and power, able to control both their industries and political actions. It was an era of the “Titans of Industry”, or the “Robber Barons”, depending on perspective. But for the average American worker, it wasn’t particularly gilded. Labor was cheap, hours were long, conditions were dangerous. Injury meant loss of income; there was no such thing as “workmen’s compensation”. It was good time for industrialists, but bad for industrial workers.
Robber Barons
Trump sees America in a second “Gilded Age”, and surrounds himself with the “robber barons” of our current era: Musk, Linda McMahon (who’d have thought “Big Time Wrestling” was a billion dollar business!), Burgham, Bessett, Lutnick and the rest. To those folks, like their predecessors in the 1880’s; the absolute “freedom” to do what they want with their fortunes without government restriction is paramount. That outlook is demonstrable in the Trump Administration’s widespread attack on government regulation. All of that is “good for the billionaires”, but not so good for the rest of us.
The second “theory” lifted from the Gilded Age is Trump’s tariff policy. In the 1880’s, the United States was a growing industrial competitor in the world, working to build industry under protection against foreign competition through tariffs. Most products, from shoes to shirts to vehicles, were made here. But the US wasn’t a “world leader” in anything in those days.
Today, the US has the most powerful economy in the world. The US has 26% of the world’s gross production. China is second with 16% and Germany third with 4%. The world leader doesn’t need “protection”. Realistically, other economies need protection from the US. So the tariff policy of the “Gilded Age” essentially puts the United States in the wrong role. We have the advantage right now, instead of other nations (like China) who are in the “up and coming” position. Ultimately, tariffs are likely to hurt our economy more than help.
Wrong Tariffs, Wrong Time
Meanwhile, the tariff policy completely disrupted the “Covid Recovery” economy of Joe Biden. Instead of things continuing to improve for the average American, we now are looking at a looming recession, with prices and unemployment going up, and investments and retirements at risk. The “gilded advisors” of Trump say we just have to “take the medicine”. But the resulting cure is likely to be good for them, not us.
Trump essentially won the Presidency on two issues; inflation and America’s changing culture. His economic policy is going to give America more inflation, lower wages, and less economic security. What it will do is help his billionaire friends. There’s no better time to have money, then when no one else has it. That’s how Joseph Kennedy, grandfather of the current Secretary of Health and Human Services, made his fortune. The Great Depression made his millions worth even more. But that didn’t help America’s regular folks, then, and it won’t now.
They just get left holding the empty bag.