John "Zippy" Callister, Doug Ross and the MSM's Three Biggest Lies

Doug Ross has an interesting blog about John "Zippy" Callister's letter to the Wall Street Journal (courtesy of Larwyn). Mr. Callister had written to the Wall Street Journal complaining that while his portfolio went up during the eight Clinton years, the S&P 500 has done little during the Bush years (actually it has done alot if, as Howard Katz and I have done, you bought in 2002 and sold last year). Mr. Callister, publicly-spirited as he is, complains that he does not care about terrorism, overseas wars, social security or income tax:

"...But, a 100 point gain in the S&P 500 means about $50,000 in my pocket... It is odd that so many people forget the stock market boom of the late 1990s."

Doug is annoyed at Zippy, and rightly so, although Zippy's argument is more revealing about the Democrats and the mainstream media than Doug suggests.

According to my broker at Smith Barney, the S&P 500 is currently at 1409. If 100 points (7% x 1409) means $50,000 to Zippy, that means his portfolio is roughly $50,000/ .07 = $714,000.

Zippy suggests that his portfolio hasn't increased since 2000, so I assume it was $714,000 in 2000. In contrast, the Census Bureau says that the median household net worth in 2000 was $55,000. The median household net worth for households in the highest income quintile was $185,000. In 2000, only 27.1% of households owned stocks and mutual fund shares at all, and these had an average value of $19,268. 29.9% of households had 401k plans with average assets of $29,900. Thus, Zippy's household wealth of $714,000 put him well above the median for the highest quintile in 2000. That Zippy favors the Democrats is revealing of the the MSM's three biggest lies:

Lie Number One: The Democrats are for wage earners, not the wealthy.
Lie Number Two: Corporate interests reflect the public interest.
Lie Number Three: The stock market goes up because of general prosperity.

MSM Lie Number One: The Democrats Favor Wage Earners, Not The Wealthy

Conservatives and libertarians often wonder why the wealthy, such as George Soros, Warren Buffett, Nancy Pelosi and Zippy, tend to prefer progressive-liberals and Democrats. The "Red" states, it has been noticed, are concentrated where there are many trust fund babies and millionaires, while the "Blue" states tend to be poorer. This is chalked up to left-wing education. But progressive-liberal dogma is consistent with the economic interests of the wealthy. The reason is that the Democrats tend to be even more inflationary than the Republicans, who are also inflationary, just not so much.

Yet, the MSM repeats the claim that inflationary, high-tax, high-regulation policies favor the average American rather than the wealthy, "Red State" trust fund babies whom such policies do favor. Zippy is merely the bull in the china shop who reveals to us that selfish impulses do matter. The Republicans' policies help the average working man while the Democrats, who claim to be for the poor, help Zippy.

MSM Lie Number Two: The Stock Market Reflects The General Prosperity

Advocates of mainstream finance theories argue that markets are rational. This has a clinical sound to it. However, even if true, rational markets do not require rationally run corporations. In fact, most big businesses aren't run rationally. They require subsidies at public expense. Even if large businesses were run efficiently without the need for government welfare, their interests would not coincide with the general public's for several reasons. Laws that protect business from competition serve corporate interests but do not serve the public interest. Since the 1850s, business has lobbied, often effectively, for protectionism, regulation to rationalize markets, easy credit, lucrative government contracts and the like. Public waste is private profit. Stockholders of firms that benefit from wasteful government contracts, protectionism, regulation and subsidies become wealthier as the public becomes poorer. Joint gains are only possible in a market economy. Yet, the MSM repeatedly claims that stock market increases are good for the general public. This is not the case in a mixed economy where government subsidies are common. They are certainly good for Zippy, who is wealthier than average and who benefits from secular stock market increases. They are also good for government contractors. But they are not good for the average person.

MSM Lie Number Three: The Stock Market Goes Up Because of General Prosperity

This is perhaps the most pernicious lie because it encourages the public to harm itself. The chief driver of the stock market is interest rates. Interest rates are chiefly influenced by the Federal Reserve Bank. The Federal Reserve Bank can raise interest rates by contracting the money supply and can reduce interest rates by increasing the money supply, i.e., printing money. The advocates of printing money were known as Populists in the 19th century. In the twentieth century they realized that if they pretended to be scientists their self-serving claims would be more convincing. Thus, they packaged their argument for increasing the money supply in the garb of "science", calling themselves "macro-economists". The "macro-economics" that they advocate is in substance the same as the arguments of the 19th century Populists, who advocated greenbacks and free silver. The macro-economists claim that they can adjust the money supply at different stages of the economic cycle, but the Fed doesn't do this. Although the Fed has never done this, the "scientists" do not revise their opinions, and when they gain power they do the same thing that the Fed has always done, namely, they support the stock and real estate markets at the expense of the general public. The money supply has gone in one consistent direction since the Fed was founded--UP. The US money supply is 16 times greater today than when the Fed was founded in 1913.

Stock and real estate markets inflate along with the money supply because of low interest rates. But increasing the money supply has another effect, namely, because the number of dollars in circulation is increased at a faster rate than the value of output increases (a painfully difficult fact for progressive-liberal advocates of the large-corporations-are-rational philosophy) there are general price increases, i.e., inflation in food, energy, labor and other prices. Prices have indeed gone up by 3.5% on average since 1979. A dollar in 1979 is worth 38 cents today. The mother of three must pay more for milk and her children might be hungry, but Zippy and his fellow Democrats gets to pocket the increase, and he is happy.

In the past six years the price of gold has gone from $250/oz. to nearly $900/oz. Thus, although the Republicans may not have been as good at inflating the stock market as the Democrats, they have been much better at inflating commodity prices. Of course, neither party is different from the other because they are both following the same inflationary policy. They are the ReInflateoCrat Party (the In stands for Bloomberg Independent). Howard S. Katz argues that there is a commodity "pendulum" which causes first declines in commodity prices and increasing stock market prices then increases in commodity prices. Katz argues that we are only at the beginning of the pendulum swing favoring commodity prices and that we still have a decade or even two to go. This will be true whether Democrats or Republicans win.

In other words, the stock market increases of the Clinton years are desirable only to trust fund babies, the wealthy, Democrats and Zippy. They are not beneficial to the average American.

What is perhaps most telling about Zippy's letter is his simple-minded selfishness, a characteristic of today's wealthy that did not characterize the wealthy of the late 19th century. I attribute this to progressive-liberal education and the general triumph of progressive-liberalism, which is a philosophy of pretended altruism coupled with the devastation of the average American through taxation and other violent state policies that progressive-liberals gleefully depict as altruistic when they are mostly self-serving.