I suspect you, dear reader, are as bemused as I am that the US stock markets and to a lesser extent those in Europe continue to rise while your preferred source of global and UK news is, I am sure, telling you that the financial implications of the Covid-19 pandemic are disastrous beyond living experience.
There is much talk of the shape of a recovery, both in markets and economies and the shape of that recovery (or non-recovery). The letters above, apart from X which is my addition, are meant to suggest the graph that we will eventually look back on in a while.
I also note that the price of gold continues to rise and in general terms the US dollar is declining in relative terms. So some people are reacting to the situation with a judgement that all is far from well in the USA.
I can offer a couple of ideas about this apparent paradox:
Firstly, it is all about Trump. It is reported widely in US news media that the President is getting all his advice from his mates who are business magnates from Wall Street and of course his personal applause machine is working flat out – Fox News and their affiliates.
They think they have him under control (as I wildly speculate does perhaps Mr Putin?). That means that they expect the US economy to kick off again soon and from the current lowish valuation base, there will be money to be made in stock trading.
Secondly, it is suggested that the businesses most hurt by the pandemic don’t make up much of the stock market in capitalisation terms anyway. With some businesses actually making more money (as happens in wars), the net impact on total profits will not be so bad and with the option to short the shares of the struggling businesses – hey, you make money both ways!
This suggests that US capitalism is cynical and amoral in the extreme. It always has been, so no surprise there.
However, it appears that people adopting that line of thinking are hiding their other vices from public view. Modern capitalism is an addict of that Class A drug, consumerism: have no doubt about that. If consumers are financially wiped out, even businesses that can sell stuff without people leaving home are going to see major downturns.
There is an obvious dislocation of opinion between Wall Street (and those that hang on to its coat tails) and the economists and bankers of the world.
We will see who prevails before long. I am not personally risking any bets on the robber barons of Wall Street getting their way this time.
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