Since my last article on Trump and the economy, the DJIA has deteriorated even further. Above we have a chart which shows the DJIA's worth in gold. At the peak of the Trump boom (in September 2018), the DJIA stood at 22 ounces; now it stands at 13 - all the gains of the Trump years have been wiped out completely .
As to why the Dow / gold ratio matters, I'll go over (once again) the basics of the supply side model. The first axiom is that gold is money, and has been for thousands of years. While today the dollar price of gold does go up and down wildly, rightly considered, this is the dollar going down (or up) in terms of gold, not the other way around. Gold is the constant, the dollar the variable.
The DJIA represents the value of America's capital stock, adjusted for future earnings, and to ascertain the true worth of the DJIA, we must divide it by the price of gold. (In the same way, the worth of almost anything - a pack of cigarettes, for example, or a nuclear submarine - can be expressed as a fraction or a multiple of an ounce of gold).
One important point made by the supply-siders is that the Dow / gold ratio reflects not what that American capital stock is worth now, but what it will be worth in the future. It is discounted to the present, meaning that all possible future information regarding earnings has been taken into account by the DJIA's price that day. The principle of the wisdom of crowds operates here: an individual investor, picked out at random, may gauge the worth of the DJIA inaccurately, but the investors in the aggregate always get it right. They made the correct assessment of the DJIA's worth in October 1987, and in October 1929.
So why is the DJIA crashing? The supply-side model gives us three possible explanations for a severe market downturn. The first is bad fiscal or regulatory policy: a threatened hike in taxes or tariffs, or in an increase in regulation, can derail the market. The same result can be brought about by bad monetary policy, e.g., a devaluation of the dollar. The third explanation concerns the geopolitical: a nuclear war breaking out tomorrow will most certainly sink stocks.
The supply-sider John Tamny wrote an article blaming the February 2020 crash on Bernie Sanders' success in the Democratic Party primaries. Much as changed since then - Sanders' star has waned - so why has the market continued to collapse? The answer lies the aforementioned reason: bad regulatory policy, in this instance caused by the adoption of disproportionate anti-Coronavirus measures. In effect, the US government is forbidding people to work. Producers cannot supply goods and services, and in the supply-side model, that is devastating.
Some of Trump's circle of supply-side advisers - Larry Kudlow, Steve Moore, Steve Forbes - are urging to Trump ramp down the restrictions, and any market rebounds of the past few weeks perhaps can be attributed to Trump's showing signs of relenting. (Certainly, the markets have ignored the Keynesian $USD2 trillion spending bill: the day after it was passed, the DJIA closed down by 4%). Perhaps because of their closeness to Trump, the supply-side advisers have not pushed hard enough. Out of all the supply-siders, only John Tamny has fought like a hellion on behalf of those who have been made unemployed and whose businesses have been damaged by the restrictions. Tamny has acted without restraint because he is not connected, so far as I can tell, to Trump.
Some on the dissident Right have welcomed the anti-virus measures because they will lead the death of globalisation, a reduction in non-white immigration, and so forth. But rest assured, the globalists still plan on bringing in plenty of non-white immigrants into the West this year (see this article, for example). There is no escape.
And this violates the social contract written around the time that the politicians began their program of the 'great replacement', the 'white genocide'. Yes, the whites of Europe and its colonies may be dispossessed, and soon they are to be done away with altogether - that is the globalist plan - but they still enjoy a level of prosperity not experienced by previous generations and the freedom to buy whatever they want. They can shop to they drop. But take that right away, and the Western masses are left with nothing. The globalist masters, the elites, are not living up to their end of the bargain.
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