Coronavirus issues. The stock market does not work.

It is something deep in our mental time. A huge fraction of the mental energy of the Americas, and certainly the attention of the Trump administration, is consumed by fluctuations in the stock markets. That in itself was debilitating for us, regardless of the direction in which it turned.

Now the coronavirus may be about to teach us a hard lesson about what this fixation has done to us. The sparkle of imaginary wealth in the stock markets has blinded us to what wealth really is.

To understand this, you need to look at some basic facts about what the stock market is and what it is not.

Shouting at actions

After the terrorist attacks of September 11, 2001, Courtney Love, singer of the widow Hole and Kurt Cobains, ad that she bought for $ 200,000 worth of stock to support the United States. Although his intentions were good, it was also completely unnecessary.

You can understand his error, however. To be alive in America is to be assaulted by an endless blather with a high decibel content Capital importance of the stock market. There are whole TV channels devoted to it, new heights are always celebrated on network news, on the front page of newspapers, on an application that comes preinstalled on your iPhone, and the president constantly yells at you about it topic.

However, the stock market has little direct relevance to ordinary people. Throughsome estimates, the richest 10% of American households represent more than 80% of American equities. The richest 1% alone own half, or 40% of the shares. Half of the Americans have no stock.

Once you understand this, the media stock market craze is incredibly hilarious. It’s like half the national news is screaming at the weather in Greenwich, Connecticut. (Our flagship article on ABC World News tonight: Greenwich was abnormally hot this afternoon.) And no one notices how bizarre it is.

On the other hand, think of the economic facts having a concrete relevance for the life of normal people: the unemployment rate, if the middle class increases, if the minimum wage increases, strikes, health care, safety at work. There's no cable TV ticker on it.

The Stock Exchange against you

That's not to say that good news for the stock market never matters to ordinary Americans. But when it does, it can be bad for most of us. The economic journalistDoug HenwoodExplains it bluntly: The reason the stock market has been so successful for all these years is precisely because the working class has not done it.

Consider these basic numbers:

In the 36 years after the end of the Second World War and the inauguration of Ronald Reagan in January 1981, the median earnings of American workers almost doubled; it has increased by about 100%. Meanwhile, the return on the S&P 500 over this period (with dividends reinvested) was 700%.

Over the next 39 years, workers' median earnings increased, perhaps 30%. But meanwhile, the S&P has increasedmore than 2,100 percent that is to say three times what it did in the decades after World War II.

But don't just believe Henwoods that these things are related. The 18th^e Century economist Adam Smith is so loved by the American right that White House staff members Reagans wore Adam Smith ties. Here's what Smith wrote in his most famous book, The wealth of nations: "The rate of profit does not increase, like rent and wages with prosperity, and decreases with the decline of society. On the contrary, it is naturally low in the rich and high in the poor countries, and it is always the highest in the countries which will ruin themselves the quickest. "

The importance of this for the stock market is that the value of a stock is, in theory, the value of its current and future cash flows essentially the value of the company's profits. But as Smith wrote, the high corporate profits are not a good sign for the rest of us. This is true for simple and complicated reasons.

The simplest is that profits are partly a measure of the bargaining power between workers and shareholders. In poor countries, workers are poor and have less leverage, so they cannot get their share of the money, leaving more left over to their employers.

After decades of attacks on unions, the United States has started to experience this dynamic. Corporate America has become ruthlessly successful in maintaining the compensation of their employees and in using the money saved for their own luscious and succulent profits.

From World War II to 2000, after-tax corporate profits generally represented 5 to 7% of the United States' gross domestic product. Since then, it has reached 10.6%, and is still close to 9%.

On the other side of the ledger, the compensation of corporate employees as a percentage of GDP continued to increase from the Second World War until 2000. Since then, it has been increasing. ; collapsed, with a slight rebound recently. As Henwood points out, even that makes the situation look better than it is, because the huge compensation of corporate executives is counted as compensation for employees.

Companies can also derive profits from countries in a more complex way. Each business enterprise creates both value and cost. Businesses excel at capturing value for themselves and forcing their companies to pay the cost. The fossil fuel industry is the first global example of this: the value it generates goes to shareholders and executives, while itcost of destroying human civilizationon the planets another seven billion people.

Financial bubbles feel good until they don't

The United States has experienced two gigantic financial bubbles in the past 20 years: the Internet bubble and the housing bubble. The two bubbles were fantastic in inflating, convincing many people that they were suddenly wealthy. Then the bubbles burst, causing extraordinary damage to ordinary Americans. When the smoke cleared, it was obvious that the only people who got rich were well-dressed charlatans.

Measured by the most recent stock market highs, it was in similar bubble territory, and it still is. A standard way to measure the cost of an action is its P / E ratio, or price-benefit: the ratio of the cost of an action to the company's earnings per share. According to a versionof the P / E ratio, over the past 150 years, the S&P 500's average has been around 15.

Until its recent plant, the S&P was trading at a P / E of around 33, more than double the historic average. At the end of business Thursday, it was still above 28. Thus, stocks are almost certainly overpriced and could fall even more.

Another way to assess stock value is the ratio of the total market capitalization of publicly traded companies to US gross domestic product. This rarely reached 100% until the late 1990s. Before the current crisis, the stock market reported that the public companies of the Americas were worth 200 percent of US GDP, the highest level ever reached.

The good news is that, again, the stock market has little direct connection to the underlying economy. It could continue to fall with little consequence, with the exception of a slight increase in anxious Trump tweets.

But here's the terrible news

All of this should reassure anyone with standard anxiety about the stock market. But everyone should feel a deep, non-standard anxiety about it, a kind of anxiety that is never on TV.

The problem with the stock market is not to go up, down or sideways. This is what our obsession has done to us. It is that paying attention to capitalism made us think like capitalists. It exerts a gravitational pull on our psyche, pushing us psychologically to the right and shredding our instincts for social solidarity.

First of all, there is a base class conflict. Once you even have a modest amount of stock, you will likely find yourself ambivalent about companies that extract as much money from their employees as possible, even if you are one of them. . Rather than thinking about how to work with everyone to prevent the Fortune 500 from ravaging America, you hope to get your very small personal share of the ravages.

Many middle and upper-income people identify with the plight of the stock markets, says Henwood. Instead of seeing him as their class enemy, they see him as their friend.

But a true friend would not entice you to take advantage of the collapsing climate. You know you should join a mass movement to stop global warming, but your Exxon stock is doing very well, so you think that when the Antarctic ice sheet collapses, you will be able to sell and buy a home in Manitoba.

Next, the prospect that the stock market encourages everyone to adopt about financial bubbles. Consider what it really means to anyone panicking about the value of their 401 (k). The sad fact is that their value of 401 (k) was never real, just like the cheap houses built in the suburbs of Florida at the height of the housing bubble were never worth 1.2 million dollars each. I hope that what everyone was counting on, without knowing it consciously, is that stocks would remain overvalued until they are sold at retirement. In other words, they depended on being able to take advantage of someone else by selling them an overpriced asset, like a flipper in Florida.

This economic structure inevitably makes us see others not as fellow citizens with whom all were together, but as potential brands. You can only buy at low prices and sell at high prices if you successfully deceive others by selling at low prices and buying at high prices. Economist John Maynard Keynesfamous describesthis type of "investment" long ago: "the real and private object of the most qualified investment today is to thwart the crowd and pass the half-crown bad or disparaging to the other. "

And that's why the stock market can literally kill you

Before a new strain of coronavirus started to run around the world, all of these problems with the stock market could seem abstract. But they are now extremely concrete. Think about what we could have done to prepare for this moment, if we were less hypnotized by small numbers on the screens and paid more attention to the reality before us.

One aspect of the reality is that certain diseases are extremely contagious and can kill you. This is why everyone in America would be much better right now if we had robust and universal healthcare, even the people who had to sell part of their shares in Apple to help pay.

Likewise, scientists have warned for decades about exactly this type of infectious disease. One of their suggestions was that the U.S. government help pay to improve public health infrastructure in poor countries. We can all regret very early on that we did not do so, even if that would have required Amazon to pay a tax rate higher than 1.2 percent and therefore dent their stock market price.

And if we had been less pierced by what the companies were doing, we could have achieved what they couldn't do. In the imaginary world of economic textbooks, a huge pharmaceutical company would have invested tens of billions in developing the capacity to improve faster and produce vaccines in huge volumes, so that the omniscient stock market would reward them for their foreknowledge. Here on Earth, the stock market would have punished any company that would have taken such a big risk with an uncertain gain. Yet we could not see that the only way to better prepare for the new coronavirus would have been much more important government action.

And there are pernicious effects from our stock market love story that are even more subtle. When deciding what to do with their lives, young people learn what to value adults, and what adults have told them, that what is precious is wealth of businesses. Imagine how much better everyone feels now if 1,000 of the smartest financial engineers in the Americas had heard instead that the most important and respected thing they could do was become an epidemiologist.

But instead of investing in real wealth, the kind of wealth that keeps us alive, we preferred to chase ghost wealth out of the stock market. Now that ghost wealth dissolves, we may find ourselves faced with our decision to be poor in what really matters.