Running With The Bulls

It seems to me….

Bull Market: A random market movement causing an investor to mistake himself for a financial genius.” ~ Anonymous.

Stock market investors always attempt to outguess market activity. While minor fluctuations are fully anticipated, failure to react sufficiently rapidly to major corrections can be financially unpleasant. The Standard & Poor’s 500 (S&P 500) has increased without a correction of 10 percent or more over the past forty months; significantly longer than the 18 months average market expansion lasts[i].

Since the U.S. Federal Reserve Bank ended its qualitative easement program, a $4.5 trillion bond-buying program, in October 2014 and the economy has continued to strengthen, an increase in interest rates probably can be anticipated by September 2015 which in the past has normally resulted in lower stock prices.

It is unfortunate that the Federal Reserve was forced to begin this program due to Congressional conservative refusal to approve a more appropriate response to prevent the economy from entering a full depression in 2009 resulting from their economic mismanagement (something they still refuse to acknowledge). A more sensible response at the time would have included a significantly larger stimulus, expanded infrastructure maintenance and improvement, and educational and research subsidies.

The national debt is the total amount the government owes – including that incurred by past administrations. The deficit is the difference between what the government takes in and what it spends – and the deficit is way down. Though Republicans might not like it, President Obama was correct when he said we’ve seen “our deficits cut by two-thirds”.

It never should be implied that national debt is unimportant but to put it into better perspective, for any other country, the size of the U.S. debt would be extremely large but as a percentage of U.S. GNP, it is not unreasonable as conservatives claim. A critical need remains for investment in most areas of our economy including infrastructure, education, healthcare, etc. where funds would be better spent rather than debt reduction. As a direct result of under investment in recent years, those areas have been allowed to deteriorate and will require substantial funding increases to recover. This will necessitate additional short-term debt if we are to reverse our current negative destructive economic cycle.

There always is the necessity of spending money to make money. Debt incurred at a long-term interest rate lower than the rate of inflation, especially when that additional debt is used to grow the economy, normally is beneficial. With the end of Qualitative Easing, long-term interest rates will not remain at their current low levels indefinitely. The opportunity to rebuild the U.S. economy and essentially be paid to do it due to higher inflation rates will soon pass. The world will not always be so willing to lend to the U.S. but if we do not reinvest in our country, that day will come much sooner rather than later. Current low interest rates will not last, the time for action is now.

Rather than accept the demonstrated fallacies of conservative politically motivate ideologies, conservative extremists continue to advocate not only continuance but even expansion of those policies that were the source of the U.S.’s current problems. By refusing appropriate economic reform, conservatives indirectly achieved part of their agenda: since the wealthy own the majority of stocks, the Federal Reserve program was more beneficial to them rather that the poor who were much more in need of assistance.

Without Congressional approval of significant economic reforms, a stock market correction directly attributable to higher interest rates can be anticipated. To mitigate correction effects, funding adjustments must include higher taxes on the wealthy, expanded infrastructure spending, elimination of educational tuition at public institutions, expanded research programs, healthcare availability for more people, and military appropriation reductions – essentially the opposite of what is advocated by conservatives now in control of both houses of the U.S. Congress.

National budgets never are about dollars; they are about ideology and priorities[ii]. Regardless of any stock market correction, investments are critically needed in research, education, training, and infrastructure to accelerate and sustain long-term economic growth; the President’s Budget indicates what can be done if we invest in the U.S.’s future and commit to an economy that rewards hard work, generates rising incomes, and allows everyone to share in the prosperity of a growing America.

Instead of what is needed, Congressional Republicans’ latest budget proposal stands in stark contrast to the President Obama’s plan to reverse sequestration and bring middle-class economics into the 21st Century. They have once again clearly shown their priority is to cut taxes for the extremely wealthy and return our economy to the same top-down economics that has repeatedly failed in the past.

House Republicans’ proposal locks in draconian sequestration cuts to investments include reductions in education, nutrition, and affordable housing. It would eliminate health insurance for 16 million Americans but protect more than $40 million in tax breaks and subsidies for rich and large corporations including oil and gas companies. It substantially increases military spending. If approved in its current form, it would lead to the loss of 2.3 million jobs over a two-year period while balancing the budget on the backs of the elderly, the children, the sick, and the vulnerable.

The 2015 Republicans apparently are intending to repeat the behavior of 1995 Republicans who demonstrated their total disregard for their country by preferring to shut it down rather than compromise. They are willing to repeat that process of using the budgetary process to force their ideology upon a Democratic president and the people of our country rather than consider what would be most beneficial for everyone.

Without increased investment in our economy, it can be anticipated that conservative extremist will attempt to cast blame for any correction upon the President and use the stock market correction to justify furtherance of their oppressive budget proposals. Having failed in their attempt to destroy the U.S. economy under President G. W. Bush in 2008, they seem to be preparing to try again.

That’s what I think, what about you?

[i] Foroohar, Rana. Who Let the Bears Out?, Time, 30 March 2015, p28.

[ii] Easley, Jason. President Obama Sends a Strong Signal That He Will Veto the Republican Budget, Politicus USA, http://www.politicususa.com/2015/03/25/president-obama-sends-strong-signal-veto-republican-budget.html, 25 March 2015.

About lewbornmann

Lewis J. Bornmann has his doctorate in Computer Science. He became a volunteer for the American Red Cross following his retirement from teaching Computer Science, Mathematics, and Information Systems, at Mesa State College in Grand Junction, CO. He previously was on the staff at the University of Wisconsin-Madison campus, Stanford University, and several other universities. Dr. Bornmann has provided emergency assistance in areas devastated by hurricanes, floods, and wildfires. He has responded to emergencies on local Disaster Action Teams (DAT), assisted with Services to Armed Forces (SAF), and taught Disaster Services classes and Health & Safety classes. He and his wife, Barb, are certified operators of the American Red Cross Emergency Communications Response Vehicle (ECRV), a self-contained unit capable of providing satellite-based communications and technology-related assistance at disaster sites. He served on the governing board of a large international professional organization (ACM), was chair of a committee overseeing several hundred worldwide volunteer chapters, helped organize large international conferences, served on numerous technical committees, and presented technical papers at numerous symposiums and conferences. He has numerous Who’s Who citations for his technical and professional contributions and many years of management experience with major corporations including General Electric, Boeing, and as an independent contractor. He was a principal contributor on numerous large technology-related development projects, including having written the Systems Concepts for NASA’s largest supercomputing system at the Ames Research Center in Silicon Valley. With over 40 years of experience in scientific and commercial computer systems management and development, he worked on a wide variety of computer-related systems from small single embedded microprocessor based applications to some of the largest distributed heterogeneous supercomputing systems ever planned.
This entry was posted in Correction, Debt, Deficit, Economy, Education, Federal Reserve, housing, Investment, Nutrition, Recovery, Research, S&P 500, Standard & Poor’s 500, Stimulus, Stock Market and tagged , , , , , , , , , , , , , , , . Bookmark the permalink.

2 Responses to Running With The Bulls

  1. Pingback: Preparing For Elections | Lew Bornmann's Blog

  2. berlioz1935 says:

    Yours is the voice of reasons. Tax cuts for the wealthy is a waste of money. It never trickles down as they can’t consume anymore. With their excess of cash, they only increase the value of stocks and property. We will see what the candidates for next year’s presidential election have to say.

    Like

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