Free at Last? Or why we are even happier than usual about the U.S. economy

Our readers know that we have long resisted the idea that the U.S. economy is headed for a serious “recession,” despite the best efforts of the Federal Reserve to wreak one, and the ravages of emergency socialism mulcting our wealth and savings.

Our reasoning has not been complicated. During the Reagan era, from 1983 to date, business cycle recessions — even by spurious bureaucratic gauges from Washington — have all but disappeared.

Every recession after 1982 has been the product of some “exogenous” event, usually some especially bone-headed U.S. policy. Today, the boneheads are all subverting the energy grid in the name of climate change, inflecting huge unmeasured wounds on an otherwise functional economy. They are also pursuing wars around the world, while subverting our best ally and technology source Israel and manufacturing source China.

Even so, measured by government economists, recessions since 1981 have been rare and on average mild. From 1945 through 1981, we had nine recessions with an average gap between them of just three-and-a-half years. Since 1983 (when the Reagan tax cuts were fully in place), the gap between recessions has been more than eight-and-a-half years.

This is because the Reagan Revolution really was revolutionary and remains substantially in place.

In particular, the Reagan tax cuts, and the inflation-suppressing supply-side bounty they ushered in across a cornucopian information economy, dramatically revived real U.S. stock market returns, which had run negative for the 20 years before Reagan.

In after-tax, after-measured-inflation terms, $100 invested in the S&P 500 in 1960 would have been worth, by 1980, a mere $77, a 33% loss on 20 years of faithful investment.

We have been taught by economists to regard these numbers as “real.” But reality is based on time. Everything else is statistical flimflam. As I explain in detail in “Life After Capitalism,” the only prices that actually matter in the long run are time-prices, calculated by dividing hours of work into GDP or any of its components. When you run out of money, you are really running out of the time to earn more money. When government prints money for itself, it is really stealing your savings and your future.

In the hours spent to buy stock market shares, and the real value represented by their time-prices translated into gold prices, the U.S. economy thrived beyond the statistics through the 1960s. However, it was doomed to fail eventually, as it did under Carter, because real investors were suffering a perverse regime of predatory tax rates, up above 90% for high earners and confiscatory for capital gains. After Nixon’s departure from the gold standard, any so-called capital “gains” were nullified by the 90-% collapse of the dollar against gold and any taxes on those fake dollar “gains” were simple theft of wealth.

Then came Reagan. Putting enormous time-prices aside for purposes of comparison, that $100 invested in 1981, by 2002 (after the tech wreck crash) had earned a so-called real after-tax gain of $314 thanks to the combined effects of a robust stock market, lower taxes on capital, and the near disappearance of inflation as Volcker’s Fed instituted an effective new, though unconfessed, gold standard for the dollar.

The result has been a four-decade boom in the stock market, and thus the allocation of capital to productive enterprise, until the crisis communists of the climate and pandemic-skewed investment sharply away from actual production. Massive subsidies and mandates wasted the world’s wealth in secular suicide cults, such as windmill totem poles, druidical sun henges, mask-hysterics and vaccine jabberwocky.

From 1950 through 1982, the average Price/Earnings Ratio (PE) of the S&P 500 was a paltry 13.6. ByJanuary 1983 (at which point the Reagan tax cuts were fully in place), the average PE had risen to 22.2. Reagan’s deriders like to cluck that the market has been in a bubble… for 44 years! But this is just the sort of change one would expect if shareholders could finally receive the benefit of their earnings.

The many attempts at counterrevolution have come to little. Both Clinton and the younger Bush were net tax cutters. Obama’s re-regulatory spree was damaging in the near term but helped elect Trump, who in most cases, more than reversed it. And Trump slashed corporate taxes by some 40%, with the result that 2018, 2020, and 2021 each set new record highs for S&P earnings.

Now, suddenly, even the green coalition of suicide cultists seems to be dissolving in the face of that most unlikely antidote, the truth:

• Sweden, yes, blessed Sweden, formerly beloved of the Left, has announced it will not replace fossil fuels with renewables, which it now regards as futile, but nuclear power. Since the demise of the Swedish Bikini Team, Americans have not paid much attention to Sweden, but Europeans remain overawed by her socialist moral authority. Stockholm’s example was enhanced by its adamant refusal to succumb to pandemic mandates and resulting age-adjusted leadership in low excess deaths.
• Beyond Tesla’s radical redefinition of automobiles as a comprehensive technology play at the top of the market, consumers are massively rejecting electric cars despite massive climate-cult subsidies. Volkswagen is seeing sales 30% shorter than the projections that caused the company to expand capacity and is cutting future expansion plans. Ford is reportedly losing more than $30,000 on every EV it sells.
• Volvo (yes Sweden again! though now owned by the Chinese) and Toyota (in the person of Chairman Akio Toyoda himself) are publicly proclaiming that EVs (as opposed to hybrids) are not the answer and are less green than gas guzzlers.

The research being cited, such as Volvo’s 2021 revelation that EVs can emit 70% more CO2 during their life cycles than petroleum burners, is not itself new, but is being newly talked about. This is possibly because governments world-wide have lost credibility on any subject to which the word “science” is hieratically invoked.

The mendacious mandate marketing of the Covid vaccines, with masks everywhere and panic ululations in the media, was devastating. But most elite communications became contemptible in the face of claims that “the science” dictates surgical mutilation of 10-year-olds, or just letting men steal NCAA women’s athletic records.

Two years ago, we were despondent over the GOPs surrender on the climate change con. Yes, they would occasionally vote right, but always as quietly as possible, like so-many latter-day Nixons who believe Republicans can govern only by stealth. GOP leaders had utterly given up on trying to lead on the issue.

Suddenly, though, with little credit to the Republican leadership, it has become possible to get a hearing against at least the most extreme climate change propaganda. A narrow opening perhaps, but the economic and human costs of the Green New Deal type programs are so devastating and unpopular that a narrow opening may be all that was needed.

And then there is the Trump-enabled Supreme Court’s resistance to elite subversion of the Constitution, not only on the hot social issues but economic rights as well. Add it all up and the Revolution looks ever more likely to just keep on rollin’ along.

P.S. Join me at FreedomFest, “the world’s largest gathering of free minds,” just a week away! I, along with my fellow Eagle Financial gurus, Mark Skousen, Bryan Perry and Jim Woods, will be speaking. The full agenda — speakers, panels, debates and breakout sessions — is now posted online. Go to www.freedomfest.com/agenda to check it out. You will be amazed! You can also click on the name of each presenter to see when and on what topic they will be speaking. Click here to find out more. When registering, use code EAGLE50 to receive a discount. I hope to see you at FreedomFest in “Music City,” Memphis, Tennessee, July 12-15.

P.P.S. Join my Eagle colleagues and me on an incredible cruise! We set sail on Dec. 4 for 16 days, enjoying a memorable journey that combines fascinating history, vibrant culture and picturesque scenery. Hear seminars on the days we are cruising from one destination to another, as well as dine with members of the Eagle team. Places we’ll visit include Mexico, Belize, Panama, Ecuador and more! Click here now for the details.