Donald Trump inherited a country on the upswing.  Unemployment was low and decreasing, and GDP was growing at a healthy clip.  The following charts show remarkable continuity.

However we’ve let that continuity hide a more sinister reality.  The $1.5 T tax cuts represented a huge transfer of the wealth of the country to the rich investors of Wall Street.  The money did not go to wages (which have only barely kept pace with inflation), nor to business investment (no significant rise), nor to bonuses (negligible one-shot deals).  It went to artificially-enhanced corporate earnings that turned into stock buy-backs.  A double win for Wall Street.

There are a lot of things that could have been done with that money, but now that it has gone into stock prices, it’s not coming back.   In fact, chances are that it’s gone for good.

1929 was a long time ago, so the world has had plenty of time to think about it.  A major factor in the crash was that inequality had risen to the point where it undermined continued growth.   Speculation pushed stock values to a point that was not sustainable by the buying power of the population.  Furthermore, the Depression was caused not just by the crash, but by mismanagement of the economy by the business-fixated Republicans in power.

Let’s tick off the items.  We have inequality that has now reached levels unheard-of since the roaring twenties.  We don’t have wild speculation on Wall Street, but we do have stocks pumped up to artificially high levels by the dual effects of enhanced earnings and corporate stock buy-backs.  Trump is still working on schemes to push Wall Street higher.

Two questions:

• Is it sustainable?

As corporate profits move back down to reality, it seems pretty clear that once again domestic buying power isn’t going to do the job.  Foreign markets might have offered some hope, but there the trade wars get in the way.  That’s why the market has gone up and down with rumors of a China deal.  However, much damage there has already been done.  Trump wants another tax cut before the election—an admission of where we are.  So the answer to the question is simply “No”.

It’s a matter of time until all that money that pumped up the stock market is gone.  Poof.

• What’s going to happen?

It’s hard to predict what’s going to pop the bubble.  In 1929, reality just set in.  That may be the case today, but there are plenty of other possibilities:  wars (particularly in the Middle East), climate catastrophes, unanticipated tariff effects, debt crises elsewhere.  Election of a Democrat won’t do it (no matter how many times Trump says so), because the problem is beyond party.  No one, Republican or Democrat, can keep pumping debt-funded artificial profits into the stock market forever.

It’s what happens next that matters.  Democrats understand the importance of stopping contraction by supporting the population.  That’s what kept us all out of depression in 2008.  Republicans didn’t understand that in 1929 and hadn’t learned the lesson in 2008.  Trump himself has done everything possible to weaken safety nets for the benefit of Wall Street.  He’ll do everything he can to protect businesses from the “losers”.

So the 2020 election is simple.  Depression:  YES or NO?