by Pam Martens and Russ Martens, wallstreetonparade:
Yesterday, Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, spoke to the Rotary Club of Downtown Sioux Falls, South Dakota and then opened up the mic to questions from the audience. One question concerned today’s lack of true innovation rather than just innovations in social media. Kashkari responded as follows:
Kashkari: “This is a big complicated topic. A big question mark in the economics profession is why is productivity growth in the U.S. economy so low. It’s much lower than it has been in prior decades. And, we think, you pull out your iPhone or Twitter or Facebook – you think, wow, all this stuff is happening. Well, some experts say the things that we’re creating now – that we’re innovating now – just aren’t that impactful. They don’t really move the needle very much. So if you compare Facebook and Twitter, which seem pretty cool, to electricity or the internal combustion engine, or the airplane, it’s just not that important.”
Kashkari is on to something significant but we have to differ with him in this regard: this is not really “a big complicated topic.” It’s a very basic concept: we are living in the most narcissistic era that America has ever experienced and it’s dragging down not only U.S. productivity but the country itself.
Memorializing this era just last week was the unprecedented “Lazy Boy” cover of Newsweek, depicting the leader of the free world as a slouch, replete with the critical necessity of this era: the smartphone on his lap — which affords him instant narcissistic gratification to his Twitter followers.
Walk on any bustling sidewalk today and you will observe a sea of pedestrian faces buried in their iPhone or some other digital device. These people are not likely thinking about creating the next internal combustion engine. They are posting personal photos to their Facebook page, Tweeting, sending selfies, checking out the latest cool restaurant, or simply gossiping with friends. Innovative minds have succumbed, on a mass scale, to digital hedonism.
Putting self above country extends to the Wall Street analysts who have made easy money fueling this craze by putting out buy recommendations on the social media companies that make these products and the billionaire hedge fund owners who have crowded into these stocks, simply because it’s a lazy boy trade.
On June 9 of this year, Robert Boroujerdi of Goldman Sachs released a report on the FAAMG stocks: Facebook, Apple, Amazon, Microsoft and Google-parent Alphabet. The report found that these five stocks have increased their market value by $600 billion this year, accounting for approximately 40 percent of the year-to-date performance of the entire 500 stocks that make up the Standard and Poor’s 500 Index.
And yet, the essential purpose of the stock market is to efficiently allocate capital to the most promising businesses for innovation that will drive productivity, job and wage growth, and a higher standard of living for all Americans.