Trump’s War On Sound Money, Part 1

It goes without saying that Donald Trump’s economic policy actions and nostrums were thoroughly wrong-headed and counter-productive. But the opposite assumption—that market capitalism is working according to the scriptures penned by Adam Smith— is also dead wrong and has been for decades now. That’s because today’s bailout-ridden crony capitalism is not remotely the real thing, and that’s especially because free markets can’t function efficiently and productively when they are flooded with cheap credit printed by the central bank.

As we have also seen, the ill effects of these perversions are legion, but one of the most obnoxious is massive financial windfalls to a tiny elite of the wealthy and a concomitant depletion of the middle class. Ironically, the Donald was elected and heralded by the latter, but his policies did absolutely nothing to change the system’s long-standing windfalls to the rich.

Here is but one of the smoking guns that can be offered in evidence. To wit, in 1989 the collective net worth of the top 1% of households weighed in at $4.8 trillion, which was 6.2X the $775 billion net worth of the bottom 50% of households. By Q1 2022, however, those figures were $45 trillion versus $3.7 trillion, meaning that the wealth differential was now 12.2X.

In round numbers, therefore, the top 1% gained $40 trillion of wealth over that 33-year period compared to the mere $3 trillion gain of the bottom 50%. Stated differently, there are currently 65 million households in the bottom 50%, which have an average net worth of just $56,000. This compares to the 1.2 million households in the top 1% which currently sport an average net worth of $38,000,000.

Needless to say, there is no reason to believe that left to its own devices free market capitalism would generate this 680:1 wealth differential per household. Indeed, three decades ago—and well before the Fed went into money-printing overdrive—the per household wealth differential between the top 1% and the bottom 50% was barely half of today’s level.

Back in the heyday of America’s post-war prosperity, in fact, President Kennedy’s famous aphorism that “a rising tide lifts all boats” was repeatedly confirmed. But once Alan Greenspan inaugurated the current era of rampant central bank money printing, stock market coddling and egregious bailouts, the more accurate characterization is that a rising tide mainly has been lifting all the yachts. And it goes without saying that only a teensy-tiny number of MAGA red caps were to be found actually lounging aboard these vessels.

The truth is, Donald Trump’s tenure in the Oval Office witnessed the steepest climb ever in the wealth of the top 1%. Nor is that surprising. The Donald was relentless in demanding that the Fed push interest rates ever lower and run the printing presses ever faster. Most of the billionaires, however, have never bothered to thank him for the windfall.