THIS IS MY 169TH BLOG ON UNDERSTANDING MONEY
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July, 2019
Are you part theorist?
Are you interested in longer-term finances and economics? This leads to the question, “do you
know what financial Jubilee years are?”
They have affected economics, finances and demographics of countries for
700 years or longer.
It is a resetting of debt worldwide approximately every
25-50 years. It is even mentioned
with some translation in the “Old Testament”, Book of Leviticus, Chapter 25, so
it is greatly part of the Jewish tradition. Even Popes back to around the 1300s spoke of this. It deals with the remission of sins and
universal pardon according to Wikipedia; equalizing, forgiving of debts and
financial shake-ups.
As I reflect back through recent history we certainly had
Jubilee years in 1929-1933. Many
of the wealthiest lost their money in the stock market and businesses during
those years. We also saw this
happen around 1969-1972 when we entered a recessionary period affecting the
stock markets. The US went off the gold standard on August 15, 1971 because of
our US debt caused mainly by the Viet Nam War and the breakup of the Bretton
Woods Agreement established in July, 1944, between countries which formed a new
international monetary system.
A Jubilee could also refer to The Great Recession here in
the US in 2007-2009. However,
during those years and after it didn’t “equalize money”, but did forgive some
debts of mainly wealthy people, big business and banks. It crippled the middle classes.
Are we infringing on another Jubilee in the near
future? I believe we could be and
we asked for it, especially when I view the extreme wealth of the top 1%, the
lowering of taxes for the top wealthiest and middle class incomes not rising in
over 40 years. Don’t be fooled by
new “employed” numbers each month.
These include part time workers at minimum wage.
I watched the Democratic Convention debates as many Americans
did. The political platforms
espoused were definitely models to a Jubilee year. Perhaps the next president will come from the Democratic
ticket, or America may wake up and realize we are broke and taxes need to be
raised. During the past 9 years we
have been living on debt more than anytime in history.
We did have income taxes on the wealthy as high as 94% in
1944. The
Economic Recovery Act of 1981 slashed highest tax brackets
from 70% to 50%, and then the Tax Reform Act of 1986, under President Reagan,
dropped the top rate to 28% in 1988.
In the 1990s we raised this rate to 39%.
I have stated my premises in other blogs, but here they are
again:
- Everything
needs to make sense at some point.
- Everything
revolves around “cause and effect”.
- Debt
kills. This relates to economies
of countries as well as people.
- Perception
is of greater value than reality.
- Don’t
trust bankers, governments or politicians!
We need social responsibility for people and companies
before profits now more than ever.
President Eisenhower warned the US of 3 areas to be watchful over when
going forward, and we naturally fell into the trap. These 3 concerns are:
- Enormous
political powers.
- Banking
industry and the financial powers.
- The
huge defense industry/machine wanting war and hegemony worldwide for
profiteering. I will add my own take here and that is, “built in fear”. Fear of Communism after WWII into Viet
Nam and Asia, fear of the strength of other nations like China, Russia and
others today.
Let me pounce again on the markets. Reuters News recently released an
article and I will repeat a few of the salient and most disturbing points. As
you might be aware the stock markets hit new highs with about $40 billion new
money coming in this year alone.
Does this relate to profitability of companies earnings; no. What concerns me further is the
passivity of the American investors becoming accustomed to 15% compounded
annual returns, when the historical norm is around 7%. The attitude is “just add more money
into my fund or stock account.” At
some point this must end. Will we
have a Jubilee year in 2019 or 2020?
According to the article and investment firm J.P. Morgan
about 80% of money flowing into markets goes to “passive investing” meaning
into computers and algorithmic modeling on trends, not active (human)
analysis. Much of this is based on
momentum driven trading, with no rationale based upon earnings and hard assets.
As a final side note, a couple months ago I mentioned gold
as one of the hedges to the markets.
At that time gold was trading at about $1295, today it is at $1400 and
above. The Chinese and the
Russians have been on a buying spree.
“Smart people” worldwide are becoming concerned about economic times.
Once again, I hope you learned something from this blog.
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