Why the Dow is Hitting 10,000 Even When Consumers Can't Buy And Business Cries "Socialism"

Why the Dow is Hitting 10,000 Even When Consumers Can't Buy And Business Cries "Socialism"

www.a lternet.org

So how can the Dow Jones Industrial Average be flirting with 10,000 when consumers, who make up 70 percent of the economy, have had to cut way back on buying because they have no money? Jobs continue to disappear. One out of six Americans is either unemployed or underemployed. Homes can no longer function as piggy banks because they’re worth almost a third less than they were two years ago. And for the first time in more than a decade, Americans are now having to pay down their debts and start to save.

Even more curious, how can the Dow be so far up when every business and Wall Street executive I come across tells me government is crushing the economy with its huge deficits, and its supposed “takeover” of health care, autos, housing, energy, and finance? Their anguished cries of “socialism” are almost drowning out all their cheering over the surging Dow.

(visit the link for the full news article)



[edit on 25-9-2009 by grover]

The article goes on to point out that:

The explanation is simple. The great consumer retreat from the market is being offset by government’s advance into the market. Consumer debt is way down from its peak in 2006; government debt is way up. Consumer spending is down, government spending is up. Why have new housing starts begun? Because the Fed is buying up Fannie and Freddie’s paper, and government-owned Fannie and Freddie are now just about the only mortgage games remaining in play.

Why are health care stocks booming? Because the government is about to expand coverage to tens of millions more Americans, and the White House has assured Big Pharma and health insurers that their profits will soar. Why are auto sales up? Because the cash-for-clunkers program has been subsidizing new car sales. Why is the financial sector surging? Because the Fed is keeping interest rates near zero, and the rest of the government is still guaranteeing any bank too big to fail will be bailed out. Why are federal contractors doing so well? Because the stimulus has kicked in.

In other words, the Dow is up despite the biggest consumer retreat from the market since the Great Depression because of the very thing so many executives are complaining about, which is government’s expansion. And regardless of what you call it – Keynesianism, socialism, or just pragmatism – it’s doing wonders for business, especially big business and Wall Street. Consumer spending is falling back to 60 to 65 percent of the economy, as government spending expands to fill the gap.

The problem is, our newly expanded government isn't doing much for average working Americans who continue to lose their jobs and whose belts continue to tighten, and who are getting almost nothing out of the rising Dow because they own few if any shares of stock. Despite the happy Dow and notwithstanding the upbeat corporate earnings, most corporations are still shedding workers and slashing payrolls. And the big banks still aren't lending to Main Street.

Trickle-down economics didn't work when the supply-siders were in charge. And it's not working now, at a time when -- despite all their cries of "socialism" -- big business and Wall Street are more politically potent than ever.

So much for Obama's policies are bad for business and is turning America socialist. In reality capitalism is having a feeding frenzy at our expense...so what else is new?

I can't think of a better example of the fact that the stock market is not a good or fair indicator of the national economy...that it has lost all connection with the you and me aspect of the economy.

The fat cats are getting fatter and you and me have to tighten our belts.



www.a lternet.org
(visit the link for the full news article)

More proof if any more was needed that Obama never was the threat the hard right has made him out to be.

So much for hysterics.


Mod Note: Reaffirming Our Desire For Productive Political Debate (REVISED)

[edit on 25-9-2009 by DontTreadOnMe]

Much of the hard right are still living out there doomsday fantasies, egged on by nuts on talk radio or Fox "news". Even housing prices have started to climb, along with home sales (Standard & Poor’s Case-Shiller Home Price Index).

So what happens when Prince John asks for more taxes to cover this spending and extravagance?

I think we already had one that said "No New Taxes"

The problem is that government spending is consumer spending just without free choice to do so. Since the people look at their own wallets and say "I cannot afford this" it item is not purchased.

If we look at the Cash for Clunkers program, nearly $3 Billion was offered, not that the payouts have been timely, and each of those that foolishly participated now have taxes to pay on that $4500 as well as the financed sales tax on the new car.

I wonder how many will find themselves in a financial hardship in April 2010?



[edit on 25-9-2009 by Ahabstar]

reply to post by grover


So.. aside from political baiting, economically speaking how is it "good" that the Government has become the increasing source for its own gdp output?

Tell me how this is "good" for the economy, speaking of course without political slant?

reply to post by Rockpuck

Did you not read my op...I did not indulge in political baiting.

I am not thrilled with all of this either. Let the big guys fail if they are that incompetent or corrupt...it is the little guy who needs help...not someone making 100 million in bonuses...much less corrupt banks.




[edit on 25-9-2009 by grover]

So who is benefiting from the DOW being at 10k? The unemployed are not. People who have had to cut back spending to bare minimum are not. Homeless aren't, hungry aren't, people on welfare aren't, people on food stamps aren't.

I'll tell you who is, the govt. Since passing THEIR stimulus bill the govt has grown by 25,000 employees (link).

To understand why this is bad ask yourself where does the govt get it's money?

I still don't understand this "Right Wing/Left wing" thingy. Could someone explaine in layman terms for me please.

Gotta love how you're trying to defend Obama with the very items the tax protesters are fighting against.

The explanation is simple. The great consumer retreat from the market is being offset by government’s advance into the market.

Fascism.

Consumer debt is way down from its peak in 2006; government debt is way up. Consumer spending is down, government spending is up.

Out of control Government spending.

Why have new housing starts begun? Because the Fed is buying up Fannie and Freddie’s paper, and government-owned Fannie and Freddie are now just about the only mortgage games remaining in play.

Fascism.

Why are health care stocks booming? Because the government is about to expand coverage to tens of millions more Americans, and the White House has assured Big Pharma and health insurers that their profits will soar.

Out of control Government spending.

Why are auto sales up? Because the cash-for-clunkers program has been subsidizing new car sales.

Out of control Government spending.

Why is the financial sector surging? Because the Fed is keeping interest rates near zero, and the rest of the government is still guaranteeing any bank too big to fail will be bailed out.

Out of control Government spending.

Why are federal contractors doing so well? Because the stimulus has kicked in.

Out of control Government spending.

The only money the Government has to spend is taxpayer money. The Government cannot earn any money, or make a profit from a product. The Dow is hitting 10k because of taxpayer money propping it up. Nothing else.

reply to post by grover


You know Grover we have been for weeks and months debating this same issue in the market data thread, occurs we know what is going on and how is that Wall street is booming while the rest of the nation falls in chaos.

But guess what everything have a limit even government spending have to stop one day.

Then what, as long as the nation employment keeps falling into chaos it will never be economic recovery so actually the wealthiest in the nation are the ones that are profiting at the expenses of the ones still paying taxes and holding a job for dear life.

More and more we see how the inequality in this nation is growing, our government is doing what they know to do best protect the wealthiest and screw the labor force, remember Reagan trickle down economics? well this time the trickle is not even there anymore.

Sorry for the short reply... simply put, this is a recipe for disaster! No countries are interested in buying our debt, which means that the government has to reign in it's spending. As unemployment increases, tax revenues decrease. As tax revenues decrease so will government spending and all of those "magical" increases in the market will begin to evoporate. We are caught in a super negative-feedback loop. The only other option is for the Fed and Treasury to artificially prop up the dollar by continuing to pour money into circulation. Does anyone know that gets you? Hyperinflation, that's what! This whole "recovery" has been a futile exercise in waste and corporate greed. A few people are going to walk away extremely wealthy while the rest of us go broke and sink into poverty. Welcome to "Change" we can all believe in!

reply to post by grover


This article sumarized how things are falling in the US economically,

In bygone days of American prosperity, American incomes rose with productivity. It was the real growth in American incomes that propelled the U.S. economy.

In today's America, the only incomes that rise are in the financial sector that risks the country's future on excessive leverage and in the corporate world that substitutes foreign for American labor. Under the compensation rules and emphasis on shareholder earnings that hold sway in the U.S. today, corporate executives maximize earnings and their compensation by minimizing the employment of Americans.

Try to find some acknowledgement of this in the "mainstream media," or among economists, who suck up to the offshoring corporations for grants.

The worst part of the decline is yet to come. Bank failures and home foreclosures are yet to peak. The commercial real estate bust is yet to hit. The dollar crisis is building.

When it hits, interest rates will rise dramatically as the U.S. struggles to finance its massive budget and trade deficits while the rest of the world tries to escape a depreciating dollar.

Hyperinflation will be our demise and the end result.

www.economyincrisis.org...

Great post, grover.

We are looking at a snapshot in time. It is my opinion that we need to let this play out before I can make a judgment about it. I like to say that I wish the banks had been allowed to fail, etc., but I can't help wondering what the snapshot would look like right now if we had.

It's always been clear to all but the most partisan, that Obama is economically Centrist, not purely Capitalist, nor purely Socialist. Somewhere in the middle, which is a good thing, IMO. Yes, the government has grown. But I wonder what would have happened had the government stepped out and let the economy take care of itself... Big businesses like Honeywell, Boeing, Intel, Best Buy, Caterpillar. Lowe's etc., may be in a very bad way and looking downward all the time. When I think of the jobs that may have been lost... Well, let's just say that I wouldn't be here right now, I'd be at work at Wal-Mart and my husband would probably be working at the Co-op or Ace Hardware, if we could even get jobs at all.

My hope is that the Dow is an indicator of good news to come, but looking at this snapshot and trying to form an opinion... it's just not enough information for me.

reply to post by Benevolent Heretic


I can tell with not doubt that Obama has never been about socialism never was just like Obamas predecessors his main aim is to protect capitalism even when he knows is nothing but corrupted and he has been target socialist for actually trying to regulate it.

Buy fail he will as this nation has been run by private interest for a long, long time.

Sad.

Is anybody going to answer my question on what the "Left/Right" thingy?
2nd line

Originally posted by Grayelf2009
Is anybody going to answer my question on what the "Left/Right" thingy?
2nd line

You are the only person who has mentioned a "Left/Right" thingy. I think it is up to you to define what that is if you want an answer.

[edit on 25-9-2009 by Benevolent Heretic]

reply to post by Ferris.Bueller.II

First off I am not defending Obama and if you think I am you are too busy formulating your attack instead of paying attention to what i wrote.

Second of all it is not fascism and if you think it is you'd better start educating yourself because you don't know what you are talking about.

Put simply so you can understand it government involvement in business is not by itself fascism.

en.wikipedia.org...

Fascism, pronounced /ˈfæʃɪzəm/, comprises a radical and authoritarian nationalist political ideology and a corporatist economic ideology developed in Italy. Fascists believe that nations and/or races are in perpetual conflict whereby only the strong can survive by being healthy, vital, and by asserting themselves in conflict against the weak.

Fascists advocate the creation of a single-party state. Fascist governments forbid and suppress openness and opposition to the government and the fascist movement. Fascism opposes class conflict, blames capitalist liberal democracies for its creation and communists for exploiting the concept.

It is btw a time honored tradition for the government to increase spending in a time of depression and panics in order to prop up the economy until the private sector can...and this policy has been used repeatedly since the late 19th century...FDR was not the first to do it and Obama will not be the last.




[edit on 25-9-2009 by grover]

You are forgetting the stock market is not an indicator at all of the current econ., it is a FORWARD LOOKING INDICATOR. Meaning 6-18 months in the future.

I would say it is right where it needs to be. We lost about 8 years so pencil in 2002-2003. We will get that back and much more historically though, just wait and see, double pinky swear.

reply to post by GreenBicMan

It is actually both and you would be right except for one thing and that is Wall street has been disassociated from the actual economy for some time... some would say decades...it does not reflect accurately on what is happening now nor does it accurately reflect what is going to happen...just what investors are betting on will happen.

When Greenspan created the recession of 2000/2001 (remember overheated economy and increased interest rates to cool it down...what is a cooled down economy? One in recession) there was talk then that the stock market was way too inflated and I personally think it still in.

People and businesses are not creating...work and sales are not there yet stocks are going through the roof again.

This is not healthy.