**** Elections thread *****

[wufwugy]

An example is that the stock market rise is a very good example of Trump being good for the average person in the economy. I forget that there is a very common populist view that stock behavior represents only the rich. So, when I use the stock market rally as a point in Trump's corner, it is viewed by others as a point against Trump.

[Jack Sawyer]

An example is that the stock market rise is a very good example of Trump being good for the average person in the economy. I forget that there is a very common populist view that stock behavior represents only the rich. So, when I use the stock market rally as a point in Trump's corner, it is viewed by others as a point against Trump.

Enlighten me with your economic vision and wizardry wufwugy; how does this particular thing benefit the average person in the economy? I was under the impression that anything the stock does benefits (or hampers) the people who hold stocks and those who broker them

[Poopadoop]

Businesses whose stock value goes up can use the money to invest in expansion. That creates jobs. Of course that only helps the average person if those jobs go to average people. A large part of the recent rise in stocks has been in financial institutions like Goldman Sachs (surprise!), who don't hire many 'average' people.

[wufwugy]

Businesses whose stock value goes up can use the money to invest in expansion. That creates jobs. Of course that only helps the average person if those jobs go to average people. A large part of the recent rise in stocks has been in financial institutions like Goldman Sachs (surprise!), who don't hire many 'average' people.

It's way more than that. What types of assets does GS hold? People with relation to those assets benefit from the rally. In fact, rallies that positively affect banks like GS don't even have to be about the banks themselves but about the assets, of which banks tend to hold a good deal. For example, if there is a increase in the expected price level of housing values, banks that hold mortgages are likely to rally too even though the lion's share of the benefit is to the home owners themselves.

Given how diversified banks are, it is very unlikely that a rally (or a fall) in stocks won't include them.

[wufwugy]

Enlighten me with your economic vision and wizardry wufwugy; how does this particular thing benefit the average person in the economy? I was under the impression that anything the stock does benefits (or hampers) the people who hold stocks and those who broker them

Changes in asset prices affect those who hold them directly and everybody else indirectly. Changes in prices in stock markets like the dow show the expected changes in the price level of assets in a given industry and/or company. A change in the price level of an industry or company affects every employee of that industry or company. While individuals who hold stock in specific companies that have a price rally benefit the most, all others affected by that industry also benefit. An example is in how one of the big rallies from Trump's election was in pharma. This positively affects everybody who works in pharma. It even affects positively those who consume pharma, just in a more diminished (proportional) sense. If we're really getting into macroeconomics, then we can point out how this rally actually positively affects every other person in every field, but because of proportions and lags, it's not easy or useful to quantify.

A common concern is that in rallies, asset holders gain more than non-holders (the Wall Street vs Main Street meme). The common concern is that this is a problem. But the truth is that this is normal, productive economic function. Think of it like if you live in a neighborhood and own a home. If the value of your home increases, it benefits you the most, but it also benefits everybody else in the neighborhood through various means like putting upward pressure on the prices of their own homes as well as increasing the wealth in the community and thus increasing aggregate demand which increases the consumption of the goods and services produced by others in the community. Can you think of a different way in which benefits from the increase in the price of your home should be distributed?

This is not to say that there isn't inherent weakness to how this works. It's not perfect, but the idea that Wall Street benefits while Main Street does not isn't that reflective of reality. The meme is probably popular because it is easy to see how an individual (like you owning a house) benefits from the asset price increasing, but not so obvious the effects of that asset price increase dispersed in the macroeconomic sense.

If you have any questions, please ask.

[Poopadoop]

Before we get too carried away with analysing the stock market, we should keep in mind that Trump's only been P.E. for a couple of months. There's still 48 months of his actual presidency to go and so any short-term change in the market is not a guarantee of what will happen in the future.

[Jack Sawyer]

Changes in asset prices affect those who hold them directly and everybody else indirectly. Changes in prices in stock markets like the dow show the expected changes in the price level of assets in a given industry and/or company. A change in the price level of an industry or company affects every employee of that industry or company. While individuals who hold stock in specific companies that have a price rally benefit the most, all others affected by that industry also benefit. An example is in how one of the big rallies from Trump's election was in pharma. This positively affects everybody who works in pharma. It even affects positively those who consume pharma, just in a more diminished (proportional) sense. If we're really getting into macroeconomics, then we can point out how this rally actually positively affects every other person in every field, but because of proportions and lags, it's not easy or useful to quantify.

A common concern is that in rallies, asset holders gain more than non-holders (the Wall Street vs Main Street meme). The common concern is that this is a problem. But the truth is that this is normal, productive economic function. Think of it like if you live in a neighborhood and own a home. If the value of your home increases, it benefits you the most, but it also benefits everybody else in the neighborhood through various means like putting upward pressure on the prices of their own homes as well as increasing the wealth in the community and thus increasing aggregate demand which increases the consumption of the goods and services produced by others in the community. Can you think of a different way in which benefits from the increase in the price of your home should be distributed?

This is not to say that there isn't inherent weakness to how this works. It's not perfect, but the idea that Wall Street benefits while Main Street does not isn't that reflective of reality. The meme is probably popular because it is easy to see how an individual (like you owning a house) benefits from the asset price increasing, but not so obvious the effects of that asset price increase dispersed in the macroeconomic sense.

If you have any questions, please ask.

Sure, I'll get back to you on this quite shortly. Derivative Financial instruments AFAIK do not make the little people, aka the working class, rich. For the quants though, that’s another story.


Needless to say I do not have a high regard for Wall Street, but I will back up my reasoning and opinion with actual facts rather than anecdotes. But, another time/