The stock market sell off of the past two weeks saw the DJIA plunge from the 29,000 range in February to the 18,000 range just this week. And all three averages including the S&P 500 and the NASDAQ fell approximately 25%. But one has to understand what is taking place. Because every sell off has a buyer. With out a buyer, there would be no sell off. So who is buying stocks during a sell off and why if things look so gloomy?
Well the answer happens to be the same people who are doing the selling are doing the buying of other stocks who have lost 20-30% of their value. Those who have a lot of resources are doing the buying also. The Bush recession of 2008 and the resulting stock market crash that lost 40% of its value was a treasure to the wealthy who had the resources to gobble up those stocks at bargain prices and those stocks went up in value all during the Obama administration and continued into the Trump administration until two weeks ago. Millions and millions were made during that period of time and most of those profits have already been cashed out before the present crash. So now the cycle will start all over again,
To really identify the sellers and buyers it is the most wealthy 5% that own 90% of all stocks and bonds. They are the ones who have the resources to do so and to them, the so called crashes are an opportunity to buy stocks at a much reduced value. With their resources they are also able to sell and make millions before the market crashes. They also have the power to manipulate the per share price of stocks. And its no coincident that the last three stock market crashes took place on the republican watch that gave the greatest tax cuts to those who needed them the least and put more money in the pockets of the wealthy. It was an extra bonus for that greedy group.
The Reagan, Bush 43 and Trump administration stock market crashes followed their huge tax cuts that fueled deficit spending. It also kick started the huge gap between the average worker compensation and business. So lets recap what was published in PolitiDose commentary dated 8/17/2018. For the 40 year period 1978-2018 according to the Economic Policy Institute, CEO compensation surged 940% while the average worker saw a meager 12% pay hike over the same period. It took place even though productivity increased dramatically but the reward did not flow to the average worker who made that productivity possible. And to top it off, the majority of the 12% pay hike for the average worker took place during the Clinton administration that did now lower taxes for the wealthy or corporate America.
The 940% increase for CEOs took place during stock market crashes and huge tax cuts for them. It is no coincident and now with the present stock market crash the U.S. Chamber of Commerce, the nations largest business organization in a letter to President Trump asked him to cancel for three months taxes business pay for social security, medicare and unemployment insurance. Three safety net programs they and the republicans hate. They are also asking for other bailouts for business. Just think how better off today the U.S. would be fiscally to handle a disaster like the coronavirus if the Reagan, Bush 43 and Trump tax cuts never took place.
So now with the Trump administration considering a federal bail out for business once again the federal deficit will be even greater. That 5% will continue to gobble up those good stocks that have lost value and make another killing and in the mean time deny sick pay and layoff pay to their own employees. No, it is not just a coincident that tax cuts for those who need them the least, stock market crashes, bank failures, depressions, recessions, deficit spending, a short lived economy with less job creation takes place on the republican watch.
It is also no coincident that during the same 40 year period, the most stable economic and fiscal times took place on the democratic watch of President's Clinton and Obama. And both understood there was not a need to offer large tax reductions for those who needed them the least. It was a real economic policy and plan that was needed.
This commentary written by Joe Lorio
