It’s not the main point of the article, but it’s worth looking at, anyway. But first, a few words on what the article, “White House economist says ‘massive refund checks’ are coming to Americans in biggest refund cycle in history,” is about. As stated in the article, “The present administration in Washington is promising big, beautiful tax refund checks to big, beautiful Americans. As reported in an article in Moneywise, “President Donald Trump is promising a windfall for millions of Americans — declaring that spring 2026 will bring the ‘largest tax refund season of all time.’ And one of his top economic advisers says the checks won’t just be big — they’ll be ‘massive.’”
Massive mounds of money for MAGA!!! How could you beat it, even if you had a stick big enough? You can’t . . . which brings us to the point of this posting, which is that such an alleged “massive” influx of big, beautiful cash creates a big, beautiful problem . . . if true. Assuming it is true, and aside from repaying the consumer debt that’s been piling up to drive the economy as today’s Keynesian system becomes increasingly out of whack, the cited article asks, “What’s the smartest way to use a sudden cash infusion? Whether you’re thinking about shoring up your finances, preparing for uncertainty, or putting that extra money to work, here are a few ways Americans may consider investing their potential windfall.”
The answer in the article? People should put their money to work by investing in the stock market. That sounds reasonable . . . until you look into it. First, of course, the projections of returns are . . . ludicrous. They assume that an average rate of return is a fixed rate of return and absolutely guaranteed every year. Uuuuh . . . no. It’s an optimistic average, and is not guaranteed, nor is it steady.
For example, suppose you start with $1,000 and — to make things easy — add $5,000 each year with a fixed return of 10% per year. Using a fixed rate of return of 10% and reinvesting all earnings, someone would end up with $24,958,907 by age 65. By taking and spending the earnings, someone would end up with $326,000 by age 65.
That sounds great, doesn’t it? The problem: the reinvestment of all earnings means that over the space of 65 years, one Trump Account results in $24,632,907 in lost consumption, a decrease of an average of $378,968 of decreased consumption every year. Multiply that times the 10,000 babies born every day on the average, or 3,650,000, and by the time the program is in full swing, the U.S. will have restricted consumption by an average — an average — of $1.383 trillion just for the people born in one year.
Conservatively multiply the decrease in consumption times a generation of twenty years, and once the program is fully implemented there would be a decrease in consumption (and thus of GDP) of $27,664 trillion . . . and U.S. GDP was $29.18 in 2024. That’s an economic shrinkage of 98.84%. That would be a catastrophic decline, even for someone who thinks he can reduce drug prices by 1,500%.
Of course, this gives the lie to the equally fixed belief that “The U.S. stock market has been a powerful engine of wealth creation.” Ummm . . . no. The stock market is a place where people buy and sell used — not new — debt and equity. It does not create anything except a place to buy and sell and foster an atmosphere of speculative frenzy. The primary market, where people engage in commerce, industry, and agriculture, now that is a “powerful engine of wealth creation.”
No, the stock market is driven by speculation, and all indications are that shares are grossly overvalued. For example, the average P/E (“Price to Earnings”) ratio on Wall Street (often tracked via the S&P 500) varies. Recent figures, however, show it around 29-30, i.e., if the price of a share is $30, the annual earnings attributable to that share will be $1, meaning it will take 30 years to generate enough in dividends to pay for the share.
Historically, long-term averages have been closer to 18-20 . . . and overvalued when compared to “payback,” i.e., how long it takes for an asset to generate its own repayment (the whole reason a company buys capital in the first place). This “suggests” the market is currently overvalued compared to its modern-era average of about 20.6 and especially so compared to payback. Admittedly, different sectors have different averages, with tech often higher (30-35+) and utilities lower (15-25), but that doesn’t improve the picture, not really.
Dragging in payback, while there is no average payback for the U.S. as a whole, generally speaking shorter is better. Fast-paced tech companies usually aim for under a year (often 3-12 months), while capital-intensive industries like commercial solar might take 5-10 years, and large enterprise sales could see payback in 12-24 months.
In other words, shareholders have been trained to accept waiting for thirty years to earn back their investment, while the companies in which they own shares think thirty months might be too long a payback period.
Evidently there is something somewhat askew if the ostensible owners of an enterprise must wait as many years as the companies they presumably own wait months to recoup their investment! And this is the system on which the Trump Accounts rely for their viability? People would be better advised to go with adopting the Economic Democracy Act.
#30#
