As was mentioned in Part 1, our national debt is growing and the government keeps raising the debt ceiling. There are plenty of large corporations enjoying all this extra spending; but where is the money ending up? I am not seeing the benefits of deficit spending in the quality of highways, nor public utility rates, nor the cost of state university tuition. My guess is that the money is going to private and foreign investors via the stock market. I will explain.
Above is a historical chart (source: MSN Money) of the Dow index, where the market’s meteoric rise is shown very clearly. Back in 1987, the index was only about 2600; but then there was a horrible stock market crash, people were caught off guard and lots of money was lost. I never believed this was an accident. Reagan deficit spending was on the rise and I think the market felt it needed to have a shake out before the market started its incredible rise. Investors like a dip in the market – that way when the market recovers, they can buy low and sell high. I remember Maria Bartiromo constantly saying on CNBC, “double dip”. Oh right, that way investors can buy low and sell high, then buy low and sell high again.
The index then hit a peak around 2000 – 2001 (11,000), dipped, regained its position and peaked again around 2008 (14,000), dipped, regained its value around 2013, and has been on a tear ever since. The Dow recently reached over 27,000. Now compare this activity in the stock market with a historical graph of our national debt given below (source: Wikipedia).
See any similarity between the outrageous rise in the stock market and the the rise in the national debt? They both start in the 80s, Reagan Administration (spending on the Strategic Defense Initiative, aka Star Wars). In 30 years, the stock market went from 2600 to 26,000. In the history of the world, that is simply unheard of. Where is the money coming from? Sweat Equity? I doubt it. Our national debt? Probably.
In 2013, I traveled to England to give a paper at the UK National Heat Transfer Conference, being held at Imperial College. I stayed at the Renaissance London Heathrow Hotel. When I entered the un-airconditioned lobby, I said, “its hot”. The girl at the front desk said, “yes the weather has been hot lately”. The outdoor temperature was only about 82 F.
I immediately turned on the TV in my hotel room and started flipping through channels: British Parliament, local news, then financial news. On the financial news station, there was a stock trader ranting about how the USA is the greatest money making machine in the history of the world, blah blah blah. I thought to myself, in the USA our stock market has just gone through the worst crash ever, corporate executives are committing suicide, banks are failing (except those too large to fail), and the sheriff is kicking families into the street who have defaulted on their home loans, dumping their belongings in the front yard. The USA is a money making machine, for who?
Before I show you the next to graphs, let us talk about some definitions first.
- International Investment Position – Value of accumulated stocks of U.S.-owned assets abroad and the accumulated values of foreign-owned assets in the United States at a point in time; the net IIP is the former minus the latter.
- Assets here refer to US owned deposits, stocks, and bonds.
- Liabilities here refer to foreign owned deposits, stocks, and bonds.
The graphs seem to indicate that a large chunk of our wealth is being sent overseas to other countries. So what is my point? I say let us stop this deficit spending and redirect the wealth back to the American people. Pumping up the stock market is one thing but trickle down theory does not work. It seems to me that when ear marked money goes to the top 1%, that money ends up overseas – either in a bank in the Bahamas or a bank in Europe.
Natural Law says that if people B migrate to country A and live close to the border, and if after years of peace, people B retain their language, religion, and identity with country B; then country B can annex that land in country A. This has happened too many times in history to list here. But what I am saying is, Americans live on this land, the resources are ours, we defend it; thus, it should be guarded for us.