Economy: the DOW vs the Wallet

[jsamuel]

All of this economic "improvement" I think can be summed up this way...

the DOW, after falling has gotten back to where it was 6 years ago...
the Wallet of the average American is as low as it has been in a long time...

That is the difference between the "economy" that the upper parts of the money chain talk about and the rest of us. There are two different economies. The stocks and the wallets. The stocks are finally back to 6 years ago (WOOPIE :sarcasm: ) while people are still out of jobs, getting paid less, having large inflation, getting jobs outsourced, having houses foreclosed, and generally moving from middle to lower class. Meanwhile, the Cheney's with all their money in stocks are moving on up. Especially if they had their money in oil...

[bryant69]

1. I don't know about this

I agree that there is a dosconnect between the life of the average worker and the economy as a whole. On the other hand a lot more people than the "Cheney's" have some involvement with the stock market.

Bryant
Check it out --> http://politicalcomment.blogspot.com

[jsamuel]

2. absolutely

people other than Cheney's do... Shoot I do, but not the same kind... We have retirement acounts... make a few % off so that we can retire... The Cheney's are the people who have so much money that they can put 1,000,000 dollars in an account for a year and make 600,000 dollars in a year in oil and do no "work". Different...


For example, the DOW could double tomorrow. Everyone who owns stocks does great. How many people don't own stocks? Most. Will the janitor get paid more tomorrow? No.

[Selatius]

3. Yeah, more like the top third of the US

The bottom third hardly have a presence beyond 401K retirement plans. The tax cuts heavily favored folks with dividend paying stocks, and most people don't have those as a source of income.

[Vincardog]

4. Right the top 2% own 90% of the stocks. That leaves a whole lot

for the rest of us to split up. :spank: :wow: :spank: :wow: :spank: :wow: :spank: :wow: :spank: :wow:
some involvement in the market is not the same a a few Million or Billion.

[sandnsea]

6. Exactly right

2% also earn more than $150,000 a year. The economy they keep talking about is THEIR economy, not ours.

[KAT119]

7. Goldman Sachs is in charge (thru * gov't) of keeping stock mkt. #'s STRONG

for "national security" WH reasons. A major article on Yahoo News appeared on this last year, written by a Canadian financial firm-http://www.sprott.com. They were furious about the unfair advantages to all of this maniupulation. Every year Goldman's profits are through the roof!

All of the #'s coming out of this admin. are bogus, and like everything else, not to be believed....

[Joe for Clark]

5. Thats right.

But stocks really didn't go anywhere but down (except oil and defense)
It is true the DOW is back to about where it was when Clinton was President--but they also have changed the components several times, so how meaningful is that. In fact, the other stock index they WON'T talk about is the NASDAQ and thats down over 50%. There aren't too many people that have done very well since Clinton left office - not too many.

You got to give the Republicans credit for puffing up statistics though - They can BS with the best.

Joe

[MadHound]

8. As a gauge of how well our economy is doing, the DOW sucks

First off, the DOW isn't even a reliable bell weather of the markets, its sample size is too small. The DOW is only a composite look at thirty companies, that's it, thirty. Compare this to the S&P 500, or the Russel 3000.

With such a statisticly small sample, no wonder we see such wild swings in the market. Whereas a big day on the DOW involves swings of tens or even hundreds of points, on other indexes, the swings are in the single digits most of the time.

Also there is the matter of the Plunge Protection Team. This is a small cadre of financial bigwigs that was established by Reagan in 1988 as a reaction to the 1987 "Black Monday" market crash. Here's the relavent portion of that executive order:

Executive Order 12631 - Working Group on Financial Markets - Mar. 18, 1988; 53 FR 9421, 3 CFR, 1988 Comp., p. 559.

"By virtue of the authority vested in me as President by the Constitution and laws of the United States of America, and in order to establish a Working Group on Financial Markets, it is hereby ordered as follows:

Section 1. Establishment. (a) There is hereby established a Working Group on Financial Markets (Working Group). The Working Group shall be composed of:

(1) the Secretary of the Treasury, or his designee;
(2) the Chairman of the Board of Governors of the Federal Reserve System, or his designee;
(3) the Chairman of the Securities and Exchange Commission, or his designee; and
(4) the Chairman of the Commodity Futures Trading Commission, or her designee.

Section 2. Purposes and Functions. (a) Recognizing the goals of enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation's financial markets and maintaining investor confidence, the Working Group shall identify and consider:

(2) the actions, including governmental actions under existing laws and regulations (such as policy coordination and contingency planning), that are appropriate to carry out these recommendations.

(b) The Working Group shall consult, as appropriate, with representatives of the various exchanges, clearinghouses, self-regulatory bodies, and with major market participants to determine private sector solutions wherever possible.

Section 3. Administration. (c) To the extent permitted by law and subject to the availability of funds therefore, the Department of the Treasury shall provide the Working Group with such administrative and support services as may be necessary for the performance of its functions."

So, instead of the "Invisible Hand" of the markets setting prices, we have political and corporate cronies guiding the markets, especially the DOW, since it is that index which gets the most publicity. This sort of meddling has turned the DOW from an educated crapshoot into an entirely rigged game, complete with loaded dice. I think that it is due to the actions of the PPT that we got the high priced bubble markets of the late ninties, and I think that it is the work of the PPT that is, at least in part, driving up the prices now. Bushco and Corporate America are desperate for people to suspend their disbelief and buy into the line that this is a great economy, when it really is a hollow shell getting ready to crumble.

And then there is the peculiar, inverse nature of the market itself. It's become an axiom that if a company wants their share price to go up, all they need to do is cut a few thousand jobs. Same thing with mergers, acquistions, busting labor unions, etc. Things that are good for the share price, good for corporate health are inversely bad for workers and the rest of us. Thus tying the real health of our economy, plentiful good jobs with decent wages, high purchasing power, low debt, etc, to the DOW becomes a futile exercise in hypocrisy and paradox. You simply can't tie the two together, now matter how many neo-con Friedman school economists try to do so.

The touting of the DOW as a barometer of our country's economic health is nothing more than a bad piece of propaganda. It was the Reagan/Bush cabal that started this false meme during the eighties, and sadly Clinton kept up that drumbeat during the ninties. Don't buy into it, because it will let you down everytime.

[jsamuel]

9. yeah, I know, but it is used for symbolism and in Bush et al.'s case...

propaganda

[Sammy Pepys]

10. Framing the debate...

This is the kind of thinking I like, but we need to be vigilant about how we present these things. While I do think the "investor class" has gained many members over the past ten years, I think making a connection betweent eh Dow and the wallets of the American working public is a comparison that's not going to gain a whole lot of traction. The stock market does not necessarily move in ways that are intuitive, and stocks and wages are not correlated in any special way.

Moreover, bryant makes a good point. I have money in the stock market too...so do a lot of people who have 401(k)s and similar retirement plans which are primarily based on mutual funds. The stock market is just not a rich man's game anymore.

The flipside of it is that if you're not in at all it's not going to make a difference to you what it's done. We gotta be crystal clear here about the issues, rather than trying to tie stocks and wages, a comparison I'm not sure works very well.

[jsamuel]

11. look at my response to bryant

"tie stocks and wages, a comparison I'm not sure works very well."

That is exactly my point. They don't tie together. That is why the whole claim of "economy is great" is not reflected by how well people actually think the economy is doing.