Special Report - The Prosperity Myth
23/March/2009 12:07 Filed in: Special
Report
Special Report – The Prosperity Myth
The only thing we have to fear is reality itself. That reality is that much of America’s and the world’s recent wealth was based solely upon a Prosperity Myth. Most people are now afraid to look at reality. Is that stress, fear, or lack of mature coping skills?
The psychoanalysis definition of narcissism is: Self-centeredness arising from failure to distinguish the self from external objects, either in very young babies or as a feature of mental disorder.
What is the foundation of your life? For most people today that foundation is money. “Show me the money,” is the cultural ethic for today’s world. Reverence for God is where your created reality truly finds ultimate meaning, flowing from your created past, through the present, and into eternity. However pretty much all religious institutions now are based on a paradigm, not of amazing grace, but “give to get.”
Pretty much everyone hopes for security, especially future security. However, now seems to be all we have, the future has become an illusion, because the Federal Government is aggressively playing with the future in the hopes of maintaining a myth of sustainable prosperity.
Last week I was reading an article, which used as an illustration the following Monetary Base graphic from the Federal Reserve. That article focused upon the tremendous gain in the Monetary Base in the very recent past. What I found quite interesting was the distinct similarity between this illustration and the data I used two weeks ago in a weekly column, “Trilogy – The Dow’s Hidden Reality.”
Federal Reserve Monetary Base
Searching for a meaningful representation of that Dow data, I was able to find this chart from the Wall Street Journal’s Market Watch. Except for that brief peak centered around the year 2000 the graphs are pretty much the same. Also interesting is the graph on the trading volume. That pretty much represents you trying to find financial security by investing your then present prosperity in Wall Street, either by various retirement mechanisms, or as a direct investor. Notice that Wall Street investing by normal folks was not normal at all until the market really began to take off exponentially in the late 1990s.
Since all my statistics books are in storage, I began to wonder just how tight the data from the Fed’s Monetary Base and the Dow Average correlated. So Sunday afternoon for every five years from 1970 through 2005 I estimated both the average yearly value for the Dow and the Monetary Base and incorporated those numbers into an Excel spreadsheet. On that data I ran a correlation coefficient (CORREL) and found a value of 0.96.
A number that high is very significant when you consider that both the Monetary Base data and the Dow level are supposedly somewhat financial independent fruits. What that really means is that they are not independent at all. A controlled or managed increase in the monetary base causes a strongly related increase in the Dow, or your perceived future wealth. That is all great if the model and the data relate to the real world. If it does not that means you are being taken, cheated, believing a lie, or being just passive, in the best interpretations. Taken, as a worst case, there is now a dude named Bernie Madoff doing time for a similar scheme for basically comparison chump change.
In that “Dow’s Hidden Reality” portion of our recent article we made the case that true real increases in wealth are linear functions. What that means is if you look at the Dow increasing value graph above and draw a straight line from the 1970s through the early 1980s that line will intersect the right axis of the graph somewhere between a Dow of 2000 – 4000 depending how optimistic you choose to be. As we related in that article this increasing wealth relates somewhat directly to the linear growth of “GDP with the money backed out.” This is quite similar to what you would see in a sustainable natural system.
Treasury Secretary Geithner today spelled out the specifics of his bank rescue package, which was first announced with great fanfare on February tenth. So now a month and some change later, we have some details that will save Wall Street and big financial investment opportunities. All those toxic assets, actually all assets, currently have some toxic components related to implied wealth compared to real wealth. As we throw another trillion at the problem, how can you, in the same asset, separate the good portion from the bad? Mark to market accounting is not up to that task and actually may become a hindrance.
But the biggest question still remains, is the model of exponential Wall Street growth still viable? Just trust in the ever-changing parameters of the hope of wishful thinking. We a told by all the powers who are in control, if we just create enough debt it will all work out fine.
Secretary Geithner is still short some-teen Assistant Secretaries at Treasury. So the question remains who designed this plan? Evidence so far indicates that the secretary is pretty much a loan lone ranger when it comes to being a competent manager. In stupendous change times like this the United States and the world should demand a competent and strong Treasury leader. But where would you find someone not tied to the Wall Street Prosperity Myth?
However, this angst was greatly calmed last week by Fed Chairman Ben Bernanke purchasing three hundred billion of securities from the Treasury to become assets for the Fed. Of course he used basically debt securities to purchase these securities. But at least he still believes in the model he inherited from Alan Greenspan that got us into this mess to begin with. This move essentially resulted in a dollar devaluation compared to the Euro of about seven percent and a rise of commodities especially gold and oil.
The President for his part that evening told some jokes on late night television. This week he moves the gig to a primetime news conference. So if we choose to watch we will see his teleprompter roll lines from a version of Hamlet, updated into radical Chicago political euphemisms.
Then on Friday the House of Representatives voted for a 90% tax on Executive Bonuses. That outrage, because they were all so serious, seems to make all the above look like genuine applied genius.
The real problem facing the country and the world is that all these attempts to bailout Wall Street misses the true wealth of the United States and that is the country’s entrepreneurial spirit. Furthermore this period of Wall Street supremacy destroyed the capital infrastructure required to rapidly fund these opportunities for true new sustainable enterprise growth. The only way this change will come is when those who still have some real wealth remaining, begin investing in true wealth creation at the grassroots level. True growth will on occur by promoting a Prosperity Myth debt funded by financial and governmental dinosaurs.
The only thing we have to fear is reality itself. That reality is that much of America’s and the world’s recent wealth was based solely upon a Prosperity Myth. Most people are now afraid to look at reality. Is that stress, fear, or lack of mature coping skills?
The psychoanalysis definition of narcissism is: Self-centeredness arising from failure to distinguish the self from external objects, either in very young babies or as a feature of mental disorder.
What is the foundation of your life? For most people today that foundation is money. “Show me the money,” is the cultural ethic for today’s world. Reverence for God is where your created reality truly finds ultimate meaning, flowing from your created past, through the present, and into eternity. However pretty much all religious institutions now are based on a paradigm, not of amazing grace, but “give to get.”
Pretty much everyone hopes for security, especially future security. However, now seems to be all we have, the future has become an illusion, because the Federal Government is aggressively playing with the future in the hopes of maintaining a myth of sustainable prosperity.
Last week I was reading an article, which used as an illustration the following Monetary Base graphic from the Federal Reserve. That article focused upon the tremendous gain in the Monetary Base in the very recent past. What I found quite interesting was the distinct similarity between this illustration and the data I used two weeks ago in a weekly column, “Trilogy – The Dow’s Hidden Reality.”
Federal Reserve Monetary Base
Searching for a meaningful representation of that Dow data, I was able to find this chart from the Wall Street Journal’s Market Watch. Except for that brief peak centered around the year 2000 the graphs are pretty much the same. Also interesting is the graph on the trading volume. That pretty much represents you trying to find financial security by investing your then present prosperity in Wall Street, either by various retirement mechanisms, or as a direct investor. Notice that Wall Street investing by normal folks was not normal at all until the market really began to take off exponentially in the late 1990s.
Since all my statistics books are in storage, I began to wonder just how tight the data from the Fed’s Monetary Base and the Dow Average correlated. So Sunday afternoon for every five years from 1970 through 2005 I estimated both the average yearly value for the Dow and the Monetary Base and incorporated those numbers into an Excel spreadsheet. On that data I ran a correlation coefficient (CORREL) and found a value of 0.96.
A number that high is very significant when you consider that both the Monetary Base data and the Dow level are supposedly somewhat financial independent fruits. What that really means is that they are not independent at all. A controlled or managed increase in the monetary base causes a strongly related increase in the Dow, or your perceived future wealth. That is all great if the model and the data relate to the real world. If it does not that means you are being taken, cheated, believing a lie, or being just passive, in the best interpretations. Taken, as a worst case, there is now a dude named Bernie Madoff doing time for a similar scheme for basically comparison chump change.
In that “Dow’s Hidden Reality” portion of our recent article we made the case that true real increases in wealth are linear functions. What that means is if you look at the Dow increasing value graph above and draw a straight line from the 1970s through the early 1980s that line will intersect the right axis of the graph somewhere between a Dow of 2000 – 4000 depending how optimistic you choose to be. As we related in that article this increasing wealth relates somewhat directly to the linear growth of “GDP with the money backed out.” This is quite similar to what you would see in a sustainable natural system.
Treasury Secretary Geithner today spelled out the specifics of his bank rescue package, which was first announced with great fanfare on February tenth. So now a month and some change later, we have some details that will save Wall Street and big financial investment opportunities. All those toxic assets, actually all assets, currently have some toxic components related to implied wealth compared to real wealth. As we throw another trillion at the problem, how can you, in the same asset, separate the good portion from the bad? Mark to market accounting is not up to that task and actually may become a hindrance.
But the biggest question still remains, is the model of exponential Wall Street growth still viable? Just trust in the ever-changing parameters of the hope of wishful thinking. We a told by all the powers who are in control, if we just create enough debt it will all work out fine.
Secretary Geithner is still short some-teen Assistant Secretaries at Treasury. So the question remains who designed this plan? Evidence so far indicates that the secretary is pretty much a loan lone ranger when it comes to being a competent manager. In stupendous change times like this the United States and the world should demand a competent and strong Treasury leader. But where would you find someone not tied to the Wall Street Prosperity Myth?
However, this angst was greatly calmed last week by Fed Chairman Ben Bernanke purchasing three hundred billion of securities from the Treasury to become assets for the Fed. Of course he used basically debt securities to purchase these securities. But at least he still believes in the model he inherited from Alan Greenspan that got us into this mess to begin with. This move essentially resulted in a dollar devaluation compared to the Euro of about seven percent and a rise of commodities especially gold and oil.
The President for his part that evening told some jokes on late night television. This week he moves the gig to a primetime news conference. So if we choose to watch we will see his teleprompter roll lines from a version of Hamlet, updated into radical Chicago political euphemisms.
Then on Friday the House of Representatives voted for a 90% tax on Executive Bonuses. That outrage, because they were all so serious, seems to make all the above look like genuine applied genius.
The real problem facing the country and the world is that all these attempts to bailout Wall Street misses the true wealth of the United States and that is the country’s entrepreneurial spirit. Furthermore this period of Wall Street supremacy destroyed the capital infrastructure required to rapidly fund these opportunities for true new sustainable enterprise growth. The only way this change will come is when those who still have some real wealth remaining, begin investing in true wealth creation at the grassroots level. True growth will on occur by promoting a Prosperity Myth debt funded by financial and governmental dinosaurs.