Can the United States Survive a Bear Market?

Download PDF Version Originally Posted 21-6-2018

If the stock market falls, it will take the rest of the economy with it.

Without rising asset prices, there would be no economic recovery. The model used for causing economic activity is the “If we build it they will come.” model. The idea is that if the wealthiest of the world’s citizen are enriched when the value of all they own rises independently of earnings and everything else, the recovery will extend all the way to the bottom of the food chain. Does the logic of this sound solid? If it does, I will remind you that the logic behind a chain letter sounds appealing. If you only give the idea a superficial look a chain letter sounds great.  Lets not be too hard on chain letters. Profits have been made, by those who initiate chain letters. Profits are being made by the originators of the “build it and they will come,” economic model.

Economic models are interesting animals. An economist can develop one based on any kind of logic. The model is never tested empirically. The whole population jumps on it as if it was manna sent from heaven. If engineers built a plane that has never been on a test flight, would the airlines buy it and put passengers on it? Probably they would pass on the opportunity. The pretense of knowledge pays more than does actual knowledge.

Where does government economic policy come from? It is mandated in the Full Employment Act of 1978. O.K., but how is the plan of intervention decided upon? Any economic intervention is going to be based on the needs of the world’s most politically powerful citizens. Who might that be in today’s world? Those are the folks who already have most of the worlds wealth and resources. Does it not make sense, that our plan for economic prosperity would be the one which would enrich them the most?

Build it and they will come? Did they come? No they have not. So, all of the worlds resources are now focused on preventing any type of bear market in stocks. A bear market will take the economy with it because their is no genuine economic growth that has been caused by anything other than high asset prices.

The truth is a hard sell. Fantasy Free Economics gains readers one at a time. Major search engines simply do not list blogs which disagree with their political agenda. As long as folks share the link to this blog and others speaking out against the grain, the truth will at least trickle into the public consciousness.
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About Fantasy Free Economics

James Quillian independent scholar,free market economist,and teacher of natural law. Who is James Quillian? Certainly I am nobody special, Just a tireless academic and deep thinker. Besides that, I have broken the code with respect to economics and political science. Credentials? Nothing you would be impressed with. I am not a household name. It is hard to become famous writing that virtually no one in the country is genuinely not in touch with reality. But, if I did not do that, there would be no point in my broking the broken the code. If you read the blog, it is easy to see that there are just a few charts, no math and no quantitative analysis. That is not by accident. Given what I know, those items are completely useless. I do turn out to be highly adept at applying natural law. Natural law has predominance over any principles the social science comes up. By virtue of understanding natural law, I can debunk, in just a few sentences , any theory that calls for intervention by a government. My taking the time to understand the ins and outs of Keynes General Theory is about like expecting a chemistry student to completely grasp all that the alchemists of the middle ages thought they understood in efforts to turn base metals into goal. Keynesian theory clearly calls for complete objectivity. Government can only make political decisions. Keynesian techniques call for economic decisions. So, why go any further with that? Fantasy Free Economics is in a sense a lot like technical analysis. Technical analysis began with the premise that it was impossible to gain enough information studying fundamentals to gain a trading advantage. Study the behavior of investors instead. Unlike technical analysis, I don't use technical charts. What I understand are the incentives of different people and entities active in the economics arena. For example, there is no such thing as an incentive to serve with life in the aggregate. In the aggregate, only self interest applies. It is routinely assumed otherwise. That is highly unappealing. But, I am sorry. That is the way it is. I can accept that because I am genuinely in touch with reality. Step one in using Fantasy Free Economics is for me to understand just how little I really know. A highly credentialed economist may know 100 times what I do based on the standard dogma. Compare the knowledge each of us has compared to all there is to know and we both look like we know nothing at all. There is always more than we don't know than what we do know. I am humble enough to present myself on that basis. Why? That is the way it is. I am not bad at math. I have taught math. What I understand is when to use it and when to rely on something else. Math is useless in natural law so I don't use it. While others look at numbers, I am busy understanding the forces in nature that makes their numbers what they are. That gives me a clear advantage.
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[…] the beginning of the reversal of the wealth effect. A while back I posted the following article.  Can The United States Survive A Bear Market?   The United States may well survive as a nation but the economy as it exists today will not. The […]