2020 ended the year with stock prices at all time highs. Much of this has to do with the unprecedented support that the Federal Reserve and our politicians provided in response to the COVID pandemic.
They are hoping that by propping up the stock and bond markets that they are first preventing a depression and second that the higher stock prices will spill over into the real economy.
Unfortunately, our economy is not plumbed in a way to do that. Higher stock prices are the very antithesis of a solid, well-balanced economy. All it means is that all the monetary and political efforts/accommodations are going to benefit the largest companies and wealthiest people in our nation and leaving the small businesses and average citizens behind.
A fiscal and monetary policy action will do one of three things. It will:
- Benefit only the wealthiest companies and individuals?
- Benefit everyone (public/private, large/small, wealthy/poor)?
- Benefit only those that really need it (small and poor)?
- Public companies are paying their employees more and sharing in the profits.
- People are able to save more money and not need to spend it strictly on publicly listed corporations' goods and services.
- We have strong local ecosystems and communities with less dependence on large institutions to manage our lives.
- We have more private small businesses that are thriving and that have competitive advantages over larger corporations (and controls on large corporations from becoming too dominant).
- Government has reduced its spending on wasteful programs that only benefit large corporations.
- Companies are being held responsible for the climate costs and environmental damage they are doing in the form of carbon taxes or some other mechanism.
- Executives aren't using share buybacks to enrich themselves and their shareholders at the expense of the company's ability to manage unforeseen risks like COVID.
- Government deficits are declining and new programs that benefit the poor are being financed by taxing the wealthy.
- Interest rates reflect the true market cost for risk taking and savers are able to earn a return that keeps up with inflation by not taking risk.
- We have a secure stable dollar, low inflation, and prices that don't get out of hand.