Stock market high?  We are living in an economic and political paradox.  There is much news that typically would make investors nervous.  We have just experienced two months of unanticipated inflation, a 13 year high of near 5.5 percent.  Some say this is a short-term Covid-19 catch up as the supply chains smooth out. 

 I am not as sanguine and see high inflation of 5 percent or more persisting for the balance of the year, perhaps longer.  What gives rise to other inflation concerns?  Biden and Company, yielding to the far left, are seeking a massive $4 trillion “infrastructure” program.  It is in fact low on actual infrastructure, but, how else can we sell this behemoth unless mislabeled?  

 It will institutionalize social programs (nursery care for all is part of it) a great deal further than did Lyndon Johnson’s Great Society spending that led to increased inflation and ultimately stagflation.  It’s a deal that is delighting AOC and the Squad, Bernie Sanders and the Socialists, and Keynesians in general.  But it is giving acid reflux to moderate democrats, supply siders, libertarians, and conservatives in general who fear it will lead us again to a recession, or stagflation at best.  

 How to pay for it?  This is the part that I cannot understand.  The plan is higher taxes on the rich and a global tax on U.S corporations everywhere, but there isn’t enough money from the rich and from corporations, as everyone knows.  It’s all smoke and mirrors regarding tax revenues.  If passed, deficits and higher taxes for all are inevitable. 

 Higher taxes on the high-income earners have never brought in the expected revenue because of rosy scenarios, and the rich consequently work less and earn less since they don’t keep as much as they used to of their extra effort.  Whatever you tax, you get less of it.  If you tax work, you get less work.  Further, the rich find legal ways to lower their taxable income.  After all, what are accountants for?  And corporations, who already pay their accountants more in fees to report taxes than they actually pay in taxes, will do likewise.  

 Add all this potential impact on the largest economy to the recent huge international destabilization that Biden has created,  with not even a shadow of an Afghanistan evacuation program, we see the Usual Suspects emboldened.  The whole world has just witnessed a massive crack in U.S credibility that gives shivers to our allies such as Japan, 

 China saw no international penalty from the destruction of whatever limited promised liberties existed in Hong Kong.  It advertises that it is now inches away from guzzling Taiwan.  Further, there is a destabilizing impact of Xi Jinping creating a zero-dissent dictatorship that makes Mao look like a timid schoolboy.  The Communist party is dead.  This will have a negative impact on the golden goose responsible for China’s fabulous growth over the past 3 decades, which was Deng Xiaoping’s free market capitalism.  Xi, resentful of Deng’s father who humiliated his own father, is now fearing the influence of billionaires created by Deng’s free market policies. He has imprisoned the ultra-rich, without trial, one by one, with excuse after excuse, and is effectively rescinding Deng’s free market miracle.  Accused of genocide of the Uyghurs, Xi has detained over a million for reeducation, and disdains world opinion with impunity. 

Further, for starters, Russia is about to seize the rest of the Ukraine they didn’t have the guts to swallow in the first go-around when they took a tasty bite of the Crimea.  Putin is a student of Xi and the former head ofthe KGB, and a chief architect of its famed cruelty and corruption.  In Iran where gays are routinely executed and beheaded, Khamenei  believes he now has the green light to enable terrorists throughout the middle east.  And North Korea?  Don’t ask.  Its heyday for dictators.  I figure we are in for a long period of disruptive and uncertain times. 

How can all this political and economic status not have a negative impact on the US economy?  How can the US equities markets be so cheerful?  Maybe they are not.  Safe U. S. treasures are paying next to nothing, so why bother?  There is a lot of cash swashing around the world. So, invest in the US market until it looks like musical chairs are about to start, and hope to get out before a large downswing, if there is one.  If the markets don’t get too pessimistic, but just go sideways, we’ll be lucky in my opinion.  That is my bet.  My money is in the market.  My heart is in my mouth.  It’s going to get bumpier.  Hold on tight, and good luck to everyone. 

Stan V. Smith, Ph.D., is VLM’s Quarterly Economics Columnist and president of Smith Economics Group, Ltd., headquartered in Chicago. Trained at the University of Chicago (one of the world’s pre-eminent institutions for the study of economics and the home of the law and economics movement), Smith has also taught at the university and co-authored the first textbook on the subject of economic damages. A nationally-renowned expert in economics who has testified nationwide in personal injury, wrongful death and commercial damages cases, Smith has assisted thousands of law firms in successful results for both plaintiffs and defendants, including the U.S. Department of Justice. To that end, Smith also developed the first course in forensic economics at DePaul University, and pioneered the concept of “hedonic damages,” testifying about the topic in landmark cases. His work has been featured in the ABA Journal, National Law Journal, and on the front page of the Wall Street Journal. Kyle Lauterhahn is a Senior Economic Analyst at Smith Economics Group in Chicago. Smith Economics Group, Ltd., is located at 1165 N. Clark Street, Suite 600, Chicago, IL, 60610. Dr. Smith may be reached at 312-943-1551, and at