In the fall of 2018, a nervous junior employee at the New York Stock Exchange faced a daunting dilemma. He had made a simple blunder that could taint his reputation permanently.
After a period of stagnation during the spring, the Dow Jones Industrial Average began to rise again. On October 3, it concluded at 26,828, tantalizingly close to reaching the 27,000 mark. The anticipation was palpable; even financial commentator Jim Cramer was convinced that the milestone was imminent.
This was the moment of greatest anxiety for the NYSE intern. He had neglected to order commemorative hats celebrating Dow 27,000, and the thought of Wall Street’s most prestigious index hitting this historic benchmark without any hats for traders to celebrate in was terrifying.
However, fate smiled upon him. Instead of rising, the Dow took a downturn. A week later, to the relief of the intern, the coveted Dow 27,000 hats arrived—just in time for a milestone that still remained out of reach.
Fast forward nearly eight months, and Dow 27,000 remains elusive. After a dip in October last year, the index attempted another assault on the threshold recently, but once again, it fell short. Consequently, the hats remain boxed away in a forgotten corner of a closet.
Our assessment suggests that these hats will likely remain untouched until 2050 or beyond. When the day finally comes to unveil them, it seems probable that Wall Street’s exuberance will have faded, leaving the hats as a relic of a bygone era—a colossal waste of fabric.
But not all is grim. There remains much to appreciate…
Another Day in Paradise
In many ways, we’re fortunate, even amidst chaos. The federal government may be in financial disarray, and our state and local administrations can seem erratic, yet our daily lives run smoothly.
When we turn on the tap, we are greeted with fresh water. Our daily showers are hot, and the streets are clear of sewage. Waste collection is reliable, coming rain or shine every Tuesday, and neighborhood disturbances are minimal.
Within a short stroll from our home, several grocery stores await, their shelves consistently stocked with fresh produce at remarkably low prices. Just this week, we purchased ears of corn for a mere $0.33 each—almost a steal.
Furthermore, we have access to fulfilling work. The pay is generally adequate, and aside from the occasional critique from clients, corporate leaders largely allow us the freedom to excel without micromanagement—as long as we continue to secure new business and meet financial expectations.
And let’s not forget the coffee, which flows freely, fuelling our productivity!
Should we be asking for more?
And what of Dow 27,000? Would its attainment somehow enhance our happiness?
Would it enrich the taste of our morning coffee? Would it alleviate our aches after a long day? Would the air become more refreshing? Would sunsets become more breathtaking?
Clearly, the answer is no. In reality, Dow 27,000 holds no tangible significance for our everyday lives.
Yet, it does possess some importance. The very issues hindering the Dow from reaching 27,000 may also be the ones that challenge our quality of life in the forthcoming decades. Here’s our perspective…
The Ugly End of Globalization
A critical flaw in America’s artificially constructed economy is its money, which has become fictitious. The severity of this issue cannot be underestimated.
Following Nixon’s detachment of the gold standard from the global monetary framework, the money supply expanded without restraint. For American consumers, this meant a surge in consumer price inflation, leading to chaotic consequences.
By 1980, the Consumer Price Index (CPI) hit a staggering 13.5 percent, while the yield on 30-year Treasury bonds soared to 15 percent. To prevent spiraling inflation, Federal Reserve Chairman Paul Volcker was forced to raise interest rates above 20 percent. Indeed, the landscape became grim.
At this juncture, a historically significant event occurred—approximately one billion Chinese workers entered the global labor market, willing to work for minimal compensation. This allowed the U.S. to export its inflation and jobs to China and other emerging economies throughout the following three decades.
Simultaneously, the costs of services that couldn’t be outsourced—such as healthcare and education—rose in tandem with the expanding money supply. The stagnation in U.S. wages, caused by an influx of low-cost labor from abroad, was masked by an abundance of credit. Consequently, financial assets like stocks, bonds, and real estate inflated disproportionately.
However, as we reached the end of this cycle, the Dow had still not crossed the 27,000 threshold. A combination of massive public and private debt, escalating deficits, trade tariffs, and the decline of globalization has set the stage for the resurgence of consumer price inflation within the U.S. economy.
Regardless of one’s stance on Trump’s trade policies—whether supportive or critical—there appears to be little that he or anyone else can do to mitigate the challenges lying ahead.
Sincerely,
MN Gordon
for Economic Prism
