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Advances in Social Sciences Research Journal – Vol. 8, No. 8
Publication Date: August 25, 2021
DOI:10.14738/assrj.88.10700. Bechtel, G. G. (2021). The Dow Doesn’t Serve Society. Advances in Social Sciences Research Journal, 8(8). 331-334.
Services for Science and Education – United Kingdom
The Dow Doesn’t Serve Society
Gordon G Bechtel
Warrington College of Business, University of Florida Gainesville, USA
ABSTRACT
It has recently been shown that American GDP causes several human imperatives
and is itself caused by globalization (Bechtel, 2021). This note reports a surprising
exception to this finding; namely, in contrast to other human imperatives, the Dow
doesn’t cause any good, nor is it caused by any good. The findings here will inform
the conceptual collision between Federal Reserve theory and modern monetary
theory (Kelton, 2021) vis-à-vis the global isolation of the Dow. Hopefully, this
information will also prevent young holders, who can’t afford the long-term Dow
strategy advocated by media pundits, from getting hurt.
Keywords: Causation, Estimating regression coefficients and their powers, Fractional
polynomial regression, Globalization, United Nations
INTRODUCTION
At the United Nations 75th anniversary on September 21, 2020 Secretary General Antonio
Guterres emphasized “the future we want, the United Nations we need”. In response, the UN
passed a Declaration of International Collaboration advocating an egalitarian reformation of
the UN as well as the entire global establishment. Echoing Guterres at the World Economic
Forum in Davos, Switzerland on January 25, 2021, Xi Jin Ping said: “We must build an open
world economy, firmly safeguard the multilateral trade system, and refrain from making
discriminating and exclusive standards, rules, and systems, as well as high walls that separate
trade, investment, and technology” (https://www.euractiv.com). This plea offers an investment
guide to foreign nationals, sovereign states, the United Nations, the World Bank, the
International Monetary Fund, and the New Development Bank in Shanghai.
These developments update and support Anitra Nelson’s (1999) prophetic work on money as
a commodity, which was anticipated by Karl Marx in the nineteenth century. More specifically,
Guterres and Xi Jin Ping also bolster the finding in the present article; namely, the global
isolation of the Dow.
The structure and notation of the present note are as follows: Variables D, G, H, and K denote
the Dow, American GDP, the UN’s Human Development Index, and the KOF Index of
Globalization. D is detailed daily on CNBC, G and K are described in Bechtel (2021, pp. 417-
420), and H is elaborated by Bechtel, G. G. and Bechtel, T. G. (2020, pp. 336-337). These 4
variables are deployed here in 7 regressions. The collision between modern monetary theory
and Federal Reserve theory (Kelton, 2021) are then summarized vis-à-vis the global isolation
of the Dow. The paper concludes with Anitra Nelson’s (1999) view of money and Marxian
thought in the 19th century, the advent of globalization, and it’s money-raising predecessor –
the world fair (https://en.wikipedia.org/wiki/List_of_world%27s_fairs).
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Advances in Social Sciences Research Journal (ASSRJ) Vol. 8, Issue 8, August-2021
Services for Science and Education – United Kingdom
FP-CAUSATION
Table 1 exhibits the R2s for 7 (of 12 possible) fractional polynomial regressions (over t = 1991
... 2018) with variables H, G, D, and K . The R2s in Table 1 are brought by Royston and Altman’s
(1994) generalization of polynomial regression, which estimates both coefficients and their
powers.
Table 1. FP-causation R2s for Variables D, G, H, and K
----------------------------------------------------------------------------------------
Causation D®G D®H K® G K®H K®D G®D G®H
----------------------------------------------------------------------------------------
R2 .7024 .6039 .9672 .9848 .5715 .7586 .9718
-----------------------------------------------------------------------------------------
The R2s in Table 1 strongly confirm the Dow’s global isolation. In short, the Dow does not cause
any good, nor is it caused by any good. Hopefully, these 7 R2s will inform the current debate
between modern monetary theory and Federal Reserve theory vis-à-vis the Dow Jones
Industrial Average (cf. Kelton, 2021).
MODERN MONETARY THEORY VERSUS FEDERAL RESERVE THEORY
The congress has mandated the Federal Reserve’s longstanding missions of reducing inflation
and unemployment. “The dual mandate framework is predicated on the belief that there’s a
delicate balance between too much employment and too little. It also assumes the Federal
reserve has the ability to move the economy to it’s sweet spot, where just the ‘right’ amount of
people are kept on the sidelines, wanting to work but trapped in unemployment for the sake of
keeping prices in check. [...] Today, the Federal Reserve defines full employment as a level of
unemployment that leaves millions [...] searching for jobs that don’t exist. MMT resolves the
problem by directly funding employment for those without work.
[...] Congress is a legal body with the power to suspend or modify any self-imposed constraint
[...] that might otherwise prevent lawmakers from appropriating funding or stop the Federal
Reserve from clearing authorized payments on behalf of the Treasury. Even the CBO and the
House and Senate budget committees, which were themselves created through an act of
Congress in 1974, could be dissolved or instructed to follow new protocols. And, of course, the
Federal Reserve is a creature of Congress, with a mandate that is subject to change” (Kelton,
2021, pp. 52, 238, 245).
In pursuing their current mandates, the Federal Reserve Governors find that “inflation has shot
up much faster than the Fed’s policymakers had forecast in March. Inflation jumped to 5% in
May compared with a year earlier — the largest 12-month spike since 2008. The increase was
driven partly by a huge rise in used car prices, which have soared as shortages of
semiconductors have slowed vehicle production. Sharply higher prices for car rentals, airline
tickets, and hotel rooms were also major factors, reflecting pent-up demand as consumers shift
away from the large goods purchases many of them had made while stuck at home to spending
on services” (https://apnews.com/article/inflation-health-coronavirus-pandemic-business- 380a7fc237023194d94af689f13a5ef7).
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Bechtel, G. G. (2021). The Dow Doesn’t Serve Society. Advances in Social Sciences Research Journal, 8(8). 331-334.
URL: http://dx.doi.org/10.14738/assrj.88.10700
In summary, modern monetary theory demotes monetary policy and elevates fiscal policy.
Conversely, Federal Reserve theory elevates monetary policy and demotes fiscal policy. The
isolation of the Dow discovered here should enlighten the clash of these two theories, as well
as prevent young investors, who can’t hold a long-term Dow as advocated by wealthy pundits,
from getting hurt.
CONCLUSION
“Money is one of the most significant social facts linking all people today and Marx is widely
acknowledged as the nineteenth-century thinker with the single greatest impact on social
developments in the twentieth century. This study links the two in an examination of Marx’s
unique commodity theory of money” (Nelson, 1999, Routledge Studies in the History of
Economics), the advent of globalization, and it’s money-making predecessor – the world fair,
which is an implicit direction taken in this paper.
(https://en.wikipedia.org/wiki/List_of_world%27s_fairs). Thus, future studies must confirm
the hypothesis generated here; namely, the world fair, a heretofore unacknowledged Marxian
predecessor, has been a major cause of globalization.
“I join Marx in opposing monetary reforms proposed by utopian socialists in his day and my
own. Like him I believe that a real revolution requires dethroning money and overturning the
state.” (Nelson, 1999, Preface, p. ix).
In view of the dollar’s dominance of the world’s economy, and the Dow’s isolation, the
dethroning of money appears to be necessary lest states are overturned by their common
people. In the nineteenth century Karl Marx said in Capital III “The philosophers have only
interpreted the world in various ways; the point is to change it” (cf. Nelson, p. 207)
ACKNOWLEDGMENTS
This article is dedicated to the memory of the author’s best critic, Maria Cohn Bechtel. The
author is indebted to Timothy Bechtel who informed him that Carl Marx predicted the demise
of capitalism when money becomes a commodity. The author thanks Dr. Bethany Bechtel for
the book The Great Invention: The Story of GDP and the Making and Unmaking of the Modern
World (Masood, 2016). We have also benefited from Dr. Bechtel’s insistence on monitoring a
population’s economic indicators over time, coupled with a gradual approach to loosening
entrenched economic approaches to data analysis.
CONFLICTS OF INTEREST
The author declares no conflicts of interest.
References
Bechtel, G. G.; Bechtel, T. G. 2020. GDP and human development. Open Journal of Social Sciences 8, 333-343.
Bechtel, G. G. 2021. The cause and benefits of GDP. Advances in Social Sciences Research Journal 8 (7), 413-423.
Kelton, S. 2021. The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy; Hachette Book
Group: New York, NY, USA.
Masood, E. 2016. The Great Invention: The Story of GDP and the Making and Unmaking
of the Modern World; Pegasus Books Ltd.: New York, NY, USA.