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The Ugly Truth That Broke the Economy: Josh Brown

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What You Need to Know

  • Broad financial freedom spurred by economic stimulus programs freed 'wage slaves' and broke the economy, Brown wrote.
  • People weren't supposed to see that the system buckles when everyone attains prosperity all at once, he opined.
  • The Fed is willing to crush the stock market, jobs and real estate to fight inflation and get back to 'normal,' Brown said.

The wealth created by pandemic-driven economic stimulus programs exposed a problem that “you weren’t supposed to see,” Ritholtz Wealth Management CEO Josh Brown wrote in a fiery blog post: “Widespread prosperity, it turns out, is incompatible with the American Dream.”

In a post Sunday on his blog, The Reformed Broker, Brown ripped into the Federal Reserve, CEOs, politicians and the news media, accusing authority figures of trying to distract citizens from “the truths unleashed in our economy last year” and from “the almost-liberated wage slaves being put back into their places.”

The Fed, he wrote, is willing to crush the stock market, real estate market and jobs to return to a pre-pandemic “normal” in which “the rich had unlimited options” while “the working poor had no options in this world but had lots of obligations.”

The pandemic brought the greatest real-time economic experiment since the Great Depression, with every person in the economy participating, Brown explained.

Everyone was a financial winner as the government generated $4.3 trillion in direct economic stimulus, pumping $3.95 trillion into the economy in less than 18 months, with cash going straight to business owners and regular citizens, Brown noted. Through loan forgiveness, U.S. businesses have kept almost all of the nearly $800 billion in Paycheck Protection Program money the government delivered, he said.

The experiment started with the hypothesis that the U.S. could effectively shut down all but essential commerce if it printed enough money that no one fell behind on their bills, Brown explained, adding, ”It took a lot of money, but it basically worked.”

With the sudden burst of liquidity, “everything was unprecedented,” from a booming stock market to soaring real estate values, he said. Household debt shrank, savings and net worth increased, but the pandemic experiment “worked too well,” Brown said.

“Everyone had money. Everyone had options,” he wrote. There was a “bull market” in people starting their own businesses, quitting their jobs, moving their homes, working flexible hours, secretly working two full-time jobs, indulging in hobbies and making career changes, he added.

“Whatever people wanted to do, they could do. Freedom on a previously unimaginable scale,” Brown said. “We were minting millionaires by the minute,” as investors lined up to buy businesses and real estate. “Capitalism felt like it offered possibilities for everyone for the first time ever,” he wrote.

“No one was left out. And that was the problem,” putting broad prosperity at odds with the American Dream, Brown said.

“The only way our economy works is when there are winners and losers. If everyone’s a winner, the whole thing fails. That’s what we learned at the conclusion of our experiment. You weren’t supposed to see that. Now the genie is out of the bottle. For one brief shining moment, everyone had enough money to pay their bills and the financial freedom to choose their own way of life,” he wrote.

“And it broke the f—ing economy in half.”

And now?

“The authorities are panicking. Corporate chieftains are demanding that their employees return to the way things were, in-person, in-office, full time. The federal government is hiring 87,000 new IRS employees to see about all that money out there. The Federal Reserve is trying to put the toothpaste back into the tube” by implementing the fastest interest rate hikes in four decades and unwinding its massive balance sheet, Brown wrote.

“Everyone is scrambling to undo the post-pandemic jubilee. It was too much wealth in too many hands. Too much flexibility for too many people. Too many options. Too much economic liberation.”

The news media shout that employers can’t find workers “but what they really mean is that companies can’t find workers who will accept the pay they are currently offering,” Brown wrote. ”This is a problem, we are told. After decades of stagnating wages, the bottom half of American workers finally found themselves in a position of bargaining power — and the whole system is now imploding because of it. Only took a year or so.”

The “war on inflation” is the new war on drugs, which destroyed countless lives when it had little chance of succeeding, he said.

“Today they’re willing to sacrifice the stock market, the bond market, housing values, anything — there’s nothing they’re not willing to do to get it all back under control. Over $10 trillion in wealth wiped out this year, a sacrifice on the part of wealthy Americans in order to ensure a return to normal,” Brown said.

The old status quo “kept the economy humming on an even keel,” he wrote, which was necessary. “It’s what the Federal Reserve is willing to crush the stock market and the real estate market in order to return to.”

What the Fed keeps referring to as “pain” is really “recession,” Brown added. “They are actually referring to people losing their jobs so that wage gains return to a ‘slower trajectory.’ You are being f—– around with, assaulted with the English language and all its inherent trickery.”

Regular people are being told, according to Brown: “How dare you ask for more, how dare you expect more? Stock trading time is over, get back to loading these cardboard boxes.

“I know we’re not supposed to admit these things about our system. We’re not supposed to say them aloud in polite company. But how can you say they aren’t true? How can you say that the reality is anything other than what you’ve just witnessed with your own eyes?”

“When some people have prosperity and the American Dream is still a brass ring for the masses to reach for, the system works. Everyone stays in line. When the American Dream is actually attained — by everyone all at once — the system buckles. That’s what you’re living through today.”

Brown’s blog post drew some attention if not full agreement on Twitter.

Drew Dickson, Albert Bridge Capital CIO and managing director, tweeted it was Brown “at his very best. Succinctly summarizing the surge and silliness, the fallout and repercussions. Not sure I agree with his primary conclusions, but with many of his points, absolutely.”

Another reader, Anthony Bardaro, tweeted that the article is “a couple of truths mixed in with a class-warfare charge narrative. … This just reads like it’s trying to incite social unrest.”

Financial journalist Julia La Roche called the post a must-read, to which another tweeter responded that the article was “complete and utter bull****.”


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