WHAT WE LEARNED FROM 2018
But his luck seemed to be running out. By the end of 2018, he was losing money and ended the year down about 6%. In keeping with the loony zeitgeist of the year, the stock of WWE (pro wraslin’) tripled during the first nine months of 2018. But the typical fan didn’t own the stock; he didn’t have a stock portfolio. He had only his time to sell – by the hour, the day, the week, or the month. And his time became less valuable. In March 2009, he could have worked for 40 hours and used the money to buy the entire S&P 500. Now, he’ll have to work three times as long – 127 hours – to buy the same collection of stocks. It was still a big, fat, ugly bubble... and Mr. Trump made it even bigger, even fatter, and even uglier by adding more lard. And even over the last 12 months, his time took a body slam. According to the Bureau of Labor Statistics, the average working stiff earned $26.71 per hour on January 1, 2018. Today, he earns $27.35 – 64 cents more, or a 2.4% increase. But the inflation rate for 2018 was about 2.5%. That means he actually lost 2 cents per hour during the last 12 months. That would account for a savings rate that has dropped to the lowest level in 12 years – 2.4%. A lower savings rate, of course, means that people have less to save… or are drawing
down previous savings. Either way, it is what people do when they are losing ground. UGLY BUBBLE Overall, real wealth (very roughly measured by GDP) grew at about 3% in the U.S. last year – totaling some $600 billion worth of additional output. But at the same time, debt grew faster. The federal deficit alone was $833 billion (and is already programmed to go to $1 trillion this year). Altogether, corporate, government, and household debt grew by $1.9 trillion – or more than three times as much as the output that must support it. The 2018 economy was heralded, nevertheless... by the press, Wall Street, and the president... as a great achievement. Mr. Trump quickly forgot all about the “big, fat, ugly bubble” that he claimed Barack Obama had created. Now, it was HIS big, fat, ugly bubble... and it was beautiful. Unemployment went down to levels not seen since the 1950s. GDP growth even pushed up into the 3-4% range for a couple of quarters – just as it had under Barack Obama. Trouble was, it was still a big, fat, ugly bubble... and Mr. Trump made it even bigger, even fatter, and even uglier by adding more lard. The idea was that cutting taxes for the rich would cause the economy to grow faster and wealthier.
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January 2019
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