Since I began covering markets in 2011, I have been constantly amused at how political views play into them.
When Republicans are in power, Democrats may actually want the market to go down. They will predict it, and they will be ignored by the Republicans. When the market does crash, as it did in 2008, Republicans will quickly ascribe it to something nefarious done by Democrats. Most Republicans now blame what happened on Bill Clinton and federal mortgage insurance. That was the first step in a process leading to the crash, because it created a system that was open to abuse and manipulation. But it was not, in and of itself, abuse and manipulation. That’s a process that was ignored by the Bush people.
The same is very much true in reverse. Republican investors refuse to accept that the 2009 stimulus worked to jump-start the economy and that the GM bailout worked. They even deny that Republican efforts during that period were useful, including the bailout of Wall Street. They pretend that Ben Bernanke and Hank Paulson were Democrats in disguise. (Bernanke has since said he is no longer a Republican, but does not say he is a Democrat.)
All this plays into investment decisions. Republican investors rushed into the oilpatch in 2009, attacking the President all the way for the slow pace of public leasing. Drill baby drill was one of the few parts of the 2008 GOP campaign that worked. As with previous oil booms, in the 1870s, and 1920s and the 1970s, it eventually worked too well. Prices crashed with overproduction, just as it did every other time there was a boom in exploration. Republicans acted surprised. They demanded that they be given the power to export the raw product, not just refined products. They got it, and found that did no good.
Or consider the debt. I call it the debt the debt the debt. Republicans love to pretend that the absolute level of national debt is a crash waiting to happen. It’s not. Its debt relative to the economy, debt relative to the country’s ability to pay the interest, that matters. We’re in better shape regarding debt than almost every other nation, and the fact is that the annual deficit has been cut by more than half this decade, helped by (yes) Obamacare.
The biggest mistake made by Republicans looking at the economy is what I call the story of Aladdin’s cave. They think money is a thing, like gold or jewels, when it is in fact an intermediary, something used to facilitate exchanges of goods and services for one another. When it’s doing that job money represents real value. When it’s sitting in a vault it doesn’t. The most important lesson of my reporting career is that money is a verb, not a noun. Yet Republicans, for reasons of political advantage, persist in thinking that there is some sort of limit to money, based on some tangible thing that must back it. How many times do you have to be wrong about something before people are free to ignore you?
To a Republican, everything good that happens in the economy is despite what Democrats did. Everything bad that happens is blamed on what Democrats did. The reverse is also true. When Republicans are in charge and the economy grows, it’s because of them. When it reverses, it’s despite them. That’s magical thinking.
It is also a great way to lose money. Economic cycles are not usually political cycles. It takes an enormous amount of stupid to crash the American economic ambulance. We have that, but we don’t have it in abundance, and the ambulance crashing is usually over some larger, generational issue, like the inflation which occurred around Vietnam and the Big Shitpile created to cover up Iraq.
I know Donald Trump is crazy because of his slogan, “Make America Great Again.” He says, “When I’m President you’re going to see so much winning you won’t believe it.” What does he think America is doing now? The U.S. dollar is reaching heights not seen in this century. The stock market has hit record highs – even NASDAQ 5,000 was breached. Unemployment has crashed below 5%, all while the rest of the world suffers grievous economic pain. China’s market has crashed and that country is selling many of its U.S. bonds. Middle East markets have crashed and sheikhs are having to sell their Western assets as well. Europe has just been through tremendous economic turmoil.
Yet the U.S. rides high, practically alone. The reason is Moore’s Law, and the immense productivity boosts it has created, through American leadership, in this decade. In the 1980s technology cut supply chains, with containers and bar codes that left hundreds of office-warehouse parks empty. In the 1990s the Internet began crushing white collar employment, replacing office workers and middle managers with technology. In this decade the process is happening to market-making functions of all types – retail clerks are going the way of travel agents, and malls are being emptied because people can get it cheaper from their phones. Over the next decade technology is coming for the millions of jobs people have driving cars, trucks and taxis – the process has already begun.
Where this wealth goes is a political question. That this wealth has been created is an economic fact. Those who want to question the valuations given Apple, Amazon, Facebook, or the artist formerly known as Google are engaged in wishful thinking. The promises of 1999 have been fulfilled, and there are more promises to come.
And yet. And yet. Every time there is a down day on Wall Street, reacting to China, or the falling price of oil, I see commenters and even writers of a particular political bent predicting the end of the economy as we know it. This has to be 2008 (or 1929) all over again, they think, because Obama can’t possibly be right about anything.
Yet he is. Obama and the people around him understand the durability of the tech economy. They accept its underlying premises of rapid change and job obsolescence. They’re trying to deal with these things, even while Republicans resist the reality.
It is Republican resistance to reality that has already decided the coming election. Absent the kind of mega-scandal that took down Richard Nixon, there is no path to power that denies economic, as well as scientific, reality.
