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We Can Thank Reagan For This Economy [Gilder's Daily Prophecy] July 09, 2022 [UNSUBSCRIBE]( | [ARCHIVES]( URGENT: Drug Stock Could End Arthritis? Will This Company’s Breakthrough Give New Hope To Millions? [Click here to learn more]( If You Or Somebody You Know Suffers From Arthritis, Pay Close Attention [>> Click Here For All Of The Urgent Details <<]( We Can Thank Reagan For This Economy [Richard Vigilante]Dear Daily Prophecy Reader, Dear Republicans: In case you were worried, it’s really OK with me if, in order to win the mid-terms, you go around shouting that inflation is not transitory, that it’s Biden’s fault, yet paradoxically only the Fed can fix it, and they can do that only by causing a recession, and let’s hope we have the recession before Election Day. I get it. By the standards of election rhetoric, it’s less untrue than some other election rhetoric. I declare it well within the bounds of acceptable distortion. Go for it! Throw the bums out! Just do yourselves this one favor. When managing your family’s finances, please ignore their campaign speeches. Don’t sell off your portfolio, buy canned goods or head to the hills. Things are not nearly that bad. - The current actual inflation, a general decline in the value of the dollar, probably is transitory. The policies that have kept inflation in check for 40 years remain mostly in place. Fed tightening won’t help. - The rise we are seeing in crucial prices—food, energy, and even microchips—is not inflation. Biden is right that these are supply problems. Unfortunately, he has made most of them worse. Nevertheless, supply challenges will ease somewhat over the next 12-18 months as supply chains are fixed or restructured. Don’t panic. - Robust economies manage the effective money supply themselves, rendering the Fed mostly irrelevant. Despite destructive regulatory policies, this remains a robust, inherently anti-inflationary economy. The most important thing we need to do now is pinch ourselves and recall why this economy remains resilient: the Reagan Revolution’s restoration of capitalism after 50 years in exile. How Bad it Was You can’t really have capitalism if capital is persecuted as it was in the pre-Reagan decades. Suppose you had invested $100 in the S&P 500 in 1960. By 1980, these would have been your results. - Your original $100 would have grown to $491, before taxes or inflation. - That’s an annualized return of 7.9%, 2.6 points lower than the historic S&P average of 10.5%. - With inflation raging, however, your $491 stash would be worth a mere $177, and your real annual return would be a mere 2.74 %. - Even with the cap gains rate recently reduced to 28%, after paying your $110 tax bill on your nominal gain of $391, your real gain of $77 becomes a loss of $33. - You stayed faithfully invested in the market for 21 years and lost 33% of your money. “Financial Nostradamus” makes bone-chilling prediction… In 2019, [this man]( wrote a book called Aftermath that shocked the world by predicting that “Something on the scale of a global pandemic will be the cause of the next financial crisis” And that “it will happen with 100% certainty” in the next few years. Just four months later we had the first reported case of the coronavirus. Now he’s back with another [bone-chilling prediction]( A prediction that’s already starting to come true. A prediction I’m urging you to watch right away. Because if what he says is true, within days this single event will have a profound effect on your retirement assets, your banks account and your entire way of life. [Click Here to See This Exclusive Interview]( Warning: What you’re about to see is a REAL exclusive interview with a former CIA and Pentagon insider. The content herein is NOT for the faint of heart. Now Comes Reagan. In 1981 you invest $100 in the S&P 500. We’ll assume you hold it through 2002 so as to include the Tech Wreck and not artificially boost returns. - By 2002 your $100 has become $1,289 for a nominal annual return of 12.3%, almost 17% above the historic S&P average and 56% better than 1960-1980. - With inflation subdued, even in real terms, you’ve made $551, or 8.89% per year, 244% better than your 2.74% real return for 1960-1980. - The revolution has sunk such deep roots that Clinton, a Democrat, cut the cap gains rate back to 20%. On your nominal gain of $1188.57, you owe only $237 in tax. - Your real after-tax gain is $314, or 314 % after 22 years. The spread between -33% for 1960-1980 and 314% is some 347% The Great Volcker Myth So much of this improvement is due to the collapse of inflation. Isn’t that credit to the Fed rather than Reagan? The great Volcker myth says the Fed beat inflation by raising interest rates to 20% and strangling the economy. Taking away people’s money can lower prices. But Volcker’s actions explain nothing about the next 40 years, with the money supply growing robustly and inflation and interest rates declining together in utter defiance of orthodox economics. Inflation is a decline in the value of the dollar. It happens not primarily because the Fed plays around with the money supply or interest rates, but because people decide they do not want to hold dollars or dollar-denominated securities. A shortage of investment opportunities produces a surfeit of unwanted dollars. The way to beat inflation is not to burn dollars but to get people to want more of them. That’s what Reagan did. Restoring returns on capital boosted investment, improved the quality of capital allocation, strengthened both the economy and the dollar, and ushered in a multi-decade decline in inflation and interest rates. Despite an annoying increase in the top personal tax rate, the Reagan revolution is not only still in place on net it has gotten stronger. Bush the younger cut taxes on dividends to 15%, and He Who Must Not Be Named slashed corporate taxes from a 35% maximum to 21%. The results have been cumulative and long-term in part because, as my friend George Gilder likes to say, capitalism is not primarily an incentive system but an information system. The Reagan Revolution put huge amounts of capital in the hands of people who invested it exceptionally well. Consider today’s 100 richest self-made Americans: Gates, Bezos, Thiel, Musk, Page and Brin, Ellison, Buffett, Dell, and on and on. None of these people needed billions a year to “incentivize” them to work even harder. We needed them to have billions a year because we all benefit from capital being deployed intelligently rather than burned in government firepits. The real threat to capitalism today has nothing to do with the Fed. The real threat is the rebellion against knowledge. Regards, [Richard Vigilante] Richard Vigilante Richard Vigilante is a senior analyst with the George Gilder Report P.S. Patent No. 11,219,620 B2 could put an end to one of the biggest, most common diseases in America… one which impacts 24% of all adults in the country. In other words, this could change your health… and your finances… forever. [Click here for the details](. [BREAKING: Elon Musk Bets Big On One Crypto. Click Here Now For The Details.]( [Three founders Publishing]( To end your Gilder's Daily Prophecy e-mail subscription and associated external offers sent from Gilder's Daily Prophecy, feel free to [click here](. If you are having trouble receiving your Gilder's Daily Prophecy subscription, you can ensure its arrival in your mailbox by [whitelisting Gilder's Daily Prophecy](. Gilder's Daily Prophecy is committed to protecting and respecting your privacy. 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