All bubbles will burst but debt will remain. People are prone to believing the illusion that the Dow-Jones numbers are a measure of wealth.
Were you wealthy when the Dow was over 14,000? Has your wealth vanished? No and no. Your wealth hasn’t changed. Only the illusion that you were wealthy has disappeared.
I understand why a CNBC keeps running the Dow ticker in the lower right-hand corner of the screen. It’s audience thinks the world revolves around the ups and downs of the Wall Street casinos. What doesn’t make sense is that MSNBC and CNN take up space running those numbers. They should use their space for news, not gambling results.
People who play the market hope that they will become wealthy without having to work. Surprise! Very few do. Eighty percent of those playing the market actually lose money. Those who don’t lose think that those numbers confirm that they are smart, or their brokers are. I don’t share their delusion. In gambling, if someone loses, someone else wins. It only proves that the winners are either smarter or luckier than a bunch of losers.
Eighteen percent of that other 20 win enough to not lose. Only about 2 percent actually become wealthy. Of course they were wealthier a few months back. If they match the market they have lost half their wealth these past few months. Is losing half of your wealth in such a short period a sign of their intelligence?
While everyone from the White House to the corner bar accepts the notion that the Dow tells us something important about the economy, it’s not true. Most everyone failed to understand that the economy was in trouble until last September.
The rosy numbers in the corner of your television screen would have led you to believe the economy was healthy. After a couple of months of digging deeply into the real numbers, economists told us that the recession officially began back in November of 2007.
After giving the matter more scrutiny, we find that the average household income reached its peak back in 1973. The oil embargo started a decline. Sure, there was a decline but we could have recovered had we responded with a rational energy policy.
Then, in 1981 the seeds of today’s economy were sown. The religion of tax cuts and deregulation became the national dogma. The fundamentalists of that disgraced and disgraceful cult continue to tell us that tax cuts and deregulation will allow the free market to save us all. That is reminiscent of Herbert Hoover driving the economy deeper and deeper based on his belief in more of the same.
Plastering the Dow ticker everywhere, having everyone face Wall Street when bowing down to pray for unearned wealth, having the White House tremble at every downturn is ludicrous. It would be laughable were it not so disastrous.
Planning every fiscal policy based on the results or the expectation of results of casinos is, in a word, stupid. We desperately need to restrict the Dow ticker to CNBC and other such dens of iniquity. We need ignore the Dow, except for entertainment. Perhaps it could be relocated to the bottom right-hand corner of the screen of the wrestling channel.
While the biggest mover in both the economy and the Dow is expectation, there is no a static connection between the two. The groups moving the two are not identical, nor are their motivations.
A stock is likely to rise when the corporation lays off a large number of employees. Those employees, and those who fear they may follow, will restrict their spending, depressing the economy. Should you read the rise in the market as a positive for anyone other than the gamblers who can sell at a higher price?
Talk amongst yourselves.
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