Wednesday, February 7, 2018

What did Donald Trump do today?

He got very confused about what the stock market is and who it works for.

After Monday's record-setting 1,175-point drop in the Dow Jones Industrial Average (and comparable losses in other indexes), Trump was conspicuous by his silence--almost as though he suddenly didn't want to take responsibility for the stock market as a barometer of his presidency. But this morning, he finally weighed in via Twitter, with an excuse: "In the 'old days,' when good news was reported, the Stock Market would go up. Today, when good news is reported, the Stock Market goes down. Big mistake!"

Trump isn't wrong that markets sometimes go down on "good" news, although this was just as true in the "old days" when Trump first inherited his wealth. (Stocks also rise and fall for other, less obvious reasons.) But Trump's apparent belief that the stock market is the economy and vice versa is alarming for a few reasons. 

One is that economic policies aimed solely at goosing the stock market--which is to say, increasing hypothetical future wealth on paper--usually work against the interests of the actual economy. For example, poorly timed tax cuts that flood the wealthiest investors with cash when it's least needed, at the cost of making it harder to fight the next downturn. 

Another problem with Trump's confusion is that precious few Americans actually benefit from the paper profits of the stock market. Trump seems to think that all Americans are heavily invested in the stock market, but only about half of Americans have any money at all in the stock market--and most of those have only a few thousand dollars. As with all wealth, virtually all stock wealth is held by the wealthiest few

Why does this matter?

  • It's bad if the president is financially illiterate.