The stock market is not the U.S. economy; the stock market is an investment instrument that determines valuations of economic activity company-by-company. The valuation is considerably arbitrary, based on the determinations of the arbiters (investors). This is empirically true.
However, that said, how would the multinational underwriters, the multinational financial systems, reset all transactional tables (the bookkeeping systems underneath the valuation) ...if the U.S. stock market was every forced to re-value economic nationalism over multinational globalism?
Enter "Coronavirus".
Four years ago CTH first explained a new way to look at the U.S. economic system and how Main Street was/is disconnected from Wall Street. We presented a metaphor to explain. Before going deeper into the discussion of tomorrow; and at the request of several people who now accept the era of "deglobalization" is upon us, I first present that prior reference & then will use this as the baseline to describe what could come next.
There is a key phrase at the fulcrum of everything past:
...there had to be a point where the value of the second economy (Wall Street) surpassed the value of the first economy (Main Street).What we are going to outline in part II is the possibility what happens when this natural truism is reversed. The objective is to answer: How, specifically would Wall Street reset its evaluative systems if Main Street once again emerged as the priority?
But first, a baseline revisit is needed.
2015/2016 - Traditional economic principles have revolved around the Macro and Micro with interventionist influences driven by GDP (Gross Domestic Product, or total economic output), interest rates, inflation rates and federally controlled monetary policy designed to steer the broad economic outcomes.
Additionally, in large measure, the various data points which underline Macro principles are two dimensional. As the X-Axis goes thus, the Y-Axis responds accordingly... and so it goes.... and so it has historically gone.
Traditional monetary policy has centered upon a belief of cause and effect: (ex.1) If inflation grows, it can be reduced by rising interest rates. Or, (ex.2) as GDP shrinks, it too can be affected by decreases in interest rates to stimulate investment/production etc.
In short, FEDeral intervention.
However, against the backdrop of economic Globalism -vs- economic Americanism, CTH is noting the two dimensional economic approach is no longer a relevant model. There is another economic dimension, a third dimension. An undiscovered depth or distance between the "X" and the "Y".
I believe it is critical to understand this new dimension in order to understand Trump economic principles, and the subsequent "America-First" economy he's building.
As the distance between the X and Y increases over time, the affect detaches - slowly and almost invisibly. I believe understanding this hidden distance perspective will reconcile many of the current economic contractions. I also predict this third dimension will soon be discovered and will be extremely consequential in the coming decade.
To understand the basic theory, allow me to introduce a visual image to assist comprehension. Think about the two economies, Wall Street (paper or false economy) and Main Street (real or traditional economy) as two parallel roads or tracks. Think of Wall Street as one train engine and Main Street as another.
The Metaphor
Several decades ago, 1980-ish, our two economic engines started out in South Florida with the Wall Street economy on I-95 the East Coast, and the Main Street economy on I-75 the West Coast. The distance between them less than 100 miles.
As each economy heads North, over time the distance between them grows. As they cross the Florida State line Wall Street's engine (I-95) is now 200 miles from Main Street's engine (traveling I-75).
As we have discussed - the legislative outcomes, along with the monetary policy therein, follows the economic engine carrying the greatest political influence. Our historic result is monetary policy followed the Wall Street engine.
[...] there had to be a point where the value of the second economy (Wall Street) surpassed the value of the first economy (Main Street).Here is an example of the resulting impact as felt by consumers:
Investments, and the bets therein, needed to expand outside of the USA. hence, global(ist) investing.
However, a second more consequential aspect happened simultaneously. The politicians became more valuable to the Wall Street team than the Main Street team; and Wall Street had deeper pockets because their economy was now larger.
As a consequence Wall Street started funding political candidates and asking for legislation that benefited their interests.
When Main Street was purchasing the legislative influence the outcomes were beneficial to Main Street, and by direct attachment those outcomes also benefited the average American inside the real economy.
When Wall Street began purchasing the legislative influence, the outcomes therein became beneficial to Wall Street. Those benefits are detached from improving the livelihoods of main street Americans because the benefits are "global" needs. Global financial interests, investment interests, are now the primary filter through which the DC legislative outcomes are considered.
There is a natural disconnect. (more)
♦ TWO ECONOMIES - Time continues to pass as each economic engine heads North.
Economic Globalism expands. Wall Street's false (paper) economy becomes the far greater economy. Federal monetary policy follows and fuels the larger economy. (Note: size is determined by value, not by production.) In exchange for policy the Wall Street benefactors pay back the politicians.
Economic Nationalism shrinks. Main Street's real (traditional) economy shrinks. Domestic manufacturing drops. Jobs are off-shored. Main Street companies try to offset the shrinking economy with increased productivity (their limited fuel). Wages stagnate.
Now it's 1990 - The Wall Street economic engine (traveling I-95) reaches Northern North Carolina. However, it's now 500 miles away from Main Street's engine (traveling I-75). The Appalachian range is the geographic wedge creating the natural divide (a metaphor for 'trickle down').
By the time the decade of 2000 arrives - Wall Street's well fueled engine, and the accompanying DC legislative attention, influence and monetary policy, has reached Philadelphia.
However, Main Street's engine is in Ohio (they're now 700 miles apart) and almost out of fuel; there simply is no more productivity to squeeze. Technological gains, used as fuel for productivity, start to level-off. The engine starts to slow.
From that moment in time, and from that geographic location, all forward travel is now only going to push the two economies further apart. I-95 now heads North East, and I-75 heads due North through Michigan. The distance between these engines is going to grow much more significantly now with each passing mile/month....
However, and this is a key reference point, if you are judging their advancing progress from a globalist vessel (filled with traditional academic economists) in the mid-Atlantic, both economies (both engines) would seem to be essentially in the same place based on their latitude.
From a two-dimensional linear perspective you cannot tell the distance between them.
It is within this distance between the two economies, which grew over time, where a new economic dimension has been created and is not getting attention. It is critical to understand the detachment.
Within this three dimensional detachment you understand why Near-Zero interest rates no longer drive an expansion of the GDP. The Main Street economic engine is just too far away to gain any substantive benefit.
Despite their domestic origin in NY/DC, traditional monetary policies (over time) have focused exclusively on the Wall Street, Globalist economy. The Wall Street Economic engine was simply seen as the only economy that would survive. The Main Street engine was viewed by DC, and those who assemble the legislative priorities therein, as a dying engine, lacking fuel, and destined to be service driven only....
Within the new 3rd economic dimension, the distance between Wall Street and Main Street economic engines, you will find the data to reconcile years of odd economic detachment.
Here's where it gets really interesting. Understanding the distance between the real Main Street economic engine and the false Wall Street economic engine will help all of us to understand the scope of an upcoming economic lag; which, rather remarkably I would add, is a very interesting dynamic.
Think about these engines doing a turn about and beginning a rapid reverse. GDP can, and in my opinion, will, expand quickly. However, any interest rate hikes (monetary policy) intended to cool down that expansion -fearful of inflation- will take a long time to traverse the divide.
Additionally, inflation on durable goods will be insignificant - even as international trade agreements are renegotiated, and/or as tariffs are applied. Why? Simply because the originating nations of those products are going to go through the same type of economic detachment described above.
Those global manufacturing economies will first respond to any increases in export costs (tariffs etc.), by driving their own productivity higher as an initial offset, in the same manner American workers went through in the past three decades. The manufacturing enterprise and the financial sector remain focused on the pricing because the consumer is the most important variable. Ultimately prices are determined by wages.
♦ Inflation on imported durable goods sold in America, while necessary, will ultimately be minimal during this initial period; and expand more significantly as time progresses and off-shored manufacturing finds less and less ways to be productive. Over time, durable good prices will increase - but it will come much later.
♦ Inflation on domestic consumable goods 'may' indeed rise at a faster pace. However, it can be expected that U.S. wage rates will respond faster, naturally faster, than any monetary policy because inflation on fast-turn consumable goods become re-coupled to the ability of wage rates to afford them.
The monetary and fiscal policy impact lag, caused by the distance between federal monetary action and the domestic Main Street economy, will now work in our favor. That is, in favor of the middle-class.
Within the aforementioned distance between "X" and "Y", a result of three decades traveled by two divergent economic engines, is our new economic dimension....
"We support reinstating the Glass-Steagall Act of 1933 which prohibits commercial banks from engaging in high-risk investment," said the platform released by the Republican National Committee. (link)/snip/
Notice how each of the most critical parts of that predictive outline from four years ago essentially became our reality as President Trump applied his 'America-First' agenda.
Now, here's where it is going to get interesting again as we look forward another four years.
In part II we will answer: How, specifically would Wall Street reset it's evaluatory systems if Main Street once again emerged as the priority?... and I will outline how COVID-19 can be the spark to reset that evaluation system.
Reader Comments
There is NOTHING about Trump that is America First. The USMC is just NAFTA with TPP added in. Phase 1 of the China deal was all for the bankers and NOTHING for the American people. Trump's foreign policy is the same as Obama's--nothing has changed!!
And now on the backs of the American people every single industry in this country is getting bailed out--- Does that sound like America First??????
Trump is bringing in the NWO.
The bankers rule and Trump has been the best friend the bankers ever had, so of course he's going to get another 4 years.
The whole time these talking heads on FOX and this WHORE Sundance have been saying that the "economy is booming" many other independent financial experts on line (Greg Mannarino, Jeremiah Babe, Lynnette Zang, Mike Maloney, Peter Schiff), who have NO allegiance to either party, have been saying the economy is in FREEFALL and heading for collapse. And they were saying this LONG before the fake virus psyop.
I'm really shocked that you would post something by Sundance--he's only good on the domestic crap with the Russia Hoax and Ukraine. He knows NOTHING about foreign policy and still thinks the war on terror is real and that the US is a force of good. The man is beyond IGNORANT. He still believes in the 9/11 fairy tale and has no clue that the US supports the terrorists. And he knows NOTHING about central banking.
And apparently this is the new Republican talking point that "it's just Wall Street, but the real economy is booming" which is total BS!!!!!!!
I can't believe this ignorant ass Sundance is actually trying to sell the BS that "main street is the priority" --unbelievable!!!!!!!!! As Americans are getting destroyed!!
Same here in NZ.
Lots of people panicking, hoarding, self isolating and whatever...where are all the marauding Coronazombies?
A big crock of shit, the whole thing. Social engineering in progress.
Someone posted a great comment over at Jon Rappoport's blog nomorefakenews, something along the lines of:
they don't want us in arenas
they don't want us in bars
they don't want is in large groups
they don't want us at sporting events
because then we would all see that we are all fine and there is NO SICKNESS
It's a world wide psyop and because TPTB control the MSM, they have the power to create false reality.
But I have to say this post by Sundance absolutely SICKENS me--the middle class is being set up for destruction and Trump is playing a direct role in this. I'm completely shocked that sott.net would post this NONSENSE. Again, I admit Sundance did an excellent job on the Russia Hoax and Ukraine, and in the past he did a great job getting the truth out on Michael Brown and Trayvon Martin. But that's all he knows. He's literally WRONG on everything else.
Sundance lied about the USMC and about the China deal.
And he's dumber than a box of rocks on foreign policy, and pushes the NeoCon BS about Israel is our greatest ally and always the victim, Iran is "evil" and Saudi is "moderate."
I'm completely SHOCKED that sott.net would post such utter nonsense, with Sundance having the audacity to say that "main street" is the priority, as the citizens are now being forced to bail out entire industries and people are having their livelihoods destroyed over a central banker virus HOAX.
And now, with the epic printing, we the American people are being set up for hyperinflation, but yeah, right, "main street is the priority" and Trump is for the middle class.
And I say all of this as someone who supported his platform on the campaign (all except the part of being a WHORE for israel). He is not the same man who campaigned. Everything has changed. His foreign policy is in lockstep with the establishment.
The idea of Trump being a champion of the middle class is a cruel joke and insult as the middle class is now set up for destruction.
"Imagine a virus so deadly -- you need a test to see if you have it.
Imagine a vaccine so safe and effective -- you have to threaten and force people to take it.
Pharma will never create true cures otherwise they will put themselves out of business.
Furthermore, they'll continue to have the government declare certain items illegal."
[such as natural herbal cures, used for aeons by humanity)