The Stock Market and Economy Disconnected

Romney would have fired Bernacke though, he made that clear. He would have had a cut taxes mandate, rather then an increase taxes and spending mandate too. Probably would have stuck with it. The Bushes were bad as Democrat light oodoo economic types, but I think Romney would have managed the ship pretty well. He was right about the bailouts and some other things too, I don't think he was horrible, the problem I think is he was, or was trying to be "acceptable to the voters". There is the real problem. You get an honest politician out there and they will freak the voters out by telling them the truth, and how government has perpetuated myths etc.. They will call him a nut, and reject them for someone who tell them what they like. You have to appear moderate, and then rise above your campaign promises afterward and do whatever you want. Works for Obama, nearly worked for him, 3% is no chasm against an incumbent. I voted Paul in the primary though.

 

If you mean by "invested", you're referring to the Wall Street Casino players who play with other people's money, in the high rollers club of excess is best, then I hear ya. I'd hardly call it an investment though....rather, gambler's chips.

 

It is the stock market disconnected from the job market.

Contrary to popular belief, the stock market is NOT the same thing as the economy. And "the economy" is not necessarily the same thing as the job market. In fact, to some extent there is a dichotomy between labor and capital, as expressed in Marxist theory.

Lower wages (and fewer workers working harder for less) helps boost stock prices.

 

The stock market and the economy are not disconnected, the stock market is part of the economy but the economy is not simply the stock market.

The type of policy our central bank follows has enjoyed bipartisan support from both corporate parties. The fact of the matter is that most Americans involved in politics today believe in the corporatist, lets make a deal, protectionist type of aristocracy going on in D.C. today.

They believe that it is best for the economy and themselves to manipulate taxes and the distribution of wealth to maintain order and stability in the economy, this is the legacy we have followed since FDR, it is slowly hurting the innovative nature of true free enterprise in this country.

When a politician starts pulling up stats the first thing i look at is what the stat actually says specifically, then i move on to look at outlier effects and the often outrageous amount of lurking variables and sampling flaws that exist with the specific statistic. Graphs look pretty its true, numbers rarely lie, but what they say and what politicians insinuate they say are often different.

However, the Government is not the first entity to disrupt the economy through the stock market, since the beginning of stock exchange this market has been subject to smoke and mirror tricks that are harmful to the economy, in my opinion because the government chose to take over manipulation of the market rather than punish criminals for fraud we have failed to make the stock market, like our currency a reliable place to invest our wealth.

Thank you, all you republicans and democrats who answered this thread by ignoring the actual topic by flinging boogers at each other as usual, the DNC and the RNC would be proud of the fantastic examples they set for their constituency's.

 

Do you know of a 5 year time period that stock indexes didn't have a positive return?

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Did you know that 50 percent of Americans make less the the median wage?

 

Generally, the stock market follows the direction of the economy but not the amplitude. So, when the economy is getting better, the stock market is often rising, but it doesn't mean the market will rise between the peaks of the economic cycles. From 1966 to 1982, the economy doubled by the Dow Jones Industrial Average was flat.

People shouldn't use the market to substantiate their political views because the market has it's own rhythms separate from politics. For example, in dollar terms, the Venezuelan stock market did better in dollar terms under Chavez than the US market did under Bush. But to argue that Chavez was more pro-business than Bush would be pretty silly.

 

You can always find anecdotes otherwise, but respect for contract law and property rights are critical in a capitalist-driven economy.

 

Unemployment and capitalism. Unemployment is necessary, full employment causes problems such as inflation. Having said that I realise that in a capitalist economy “full employment” is more of a statistical concept than a real one, don’t know the percentage but I seem to remember that it’s not 100%. In a real-life economy it won’t be 100% because as you pointed out, there will be those who don’t want to work and who are quite happy loafing about on welfare. Again, a capitalist economy will okay that. I’m with Lenin when he said, you don’t work, you starve, but that’s in a socialist economy where work will be available.

Capitalism and human nature. I’m not swayed by the human nature argument. If it were so then historically humans would show as tendency to compete as individuals and for most of our species history we have in fact cooperated to survive and prosper. Capitalism is only another economic theory that is here for a while and will be replaced as circumstances change. The pursuit of power, I agree, is part of the nature of some people, many probably, but it’s a facet of personality and not inherent in us as a species. The pursuit of individual wealth accordingly. The idea of individual wealth is tied with the idea of property which is a human invention rather than being part of human nature.

On the idea of the monopoly of force or coercion by the state – agreed, while the state exists it will always seek to maintain its monopoly. Bad enough I suppose but what if that monopoly were broken by private corporations over which most members of society have no influence? While it is desirable that the state wither away, it is less desirable to have its monopoly on coercion broken up to be distributed amongst private corporations.

On contracts – point taken. Capitalism works best when everyone follows the rules.

On interest rates – in a market or mixed economy interest rates will be influenced by many factors. I’m not an economist so I don’t have the knowledge to go into detail on that. It is true that government can “pull the levers” as it were, use policy settings to deal with inflation by attempting to influence interest rates, for example, but I think that’s a long way from the sort of iron control over an economy that we see in command economies.

GFC wasn't caused by government. Perhaps it was facilitated by slackness on the part of government but government didn't cause it.

 

Point taken. True it's the disregard that causes problems.

 

Median? did you know most mathematicians don't use the median but the mean as the average when looking at skewed data.

Did you know that its not uncommon for 1 percenters to give away half of their fortunes to charity?

Did you know that no matter how many people are rich or poor 50 percent of Americans will make less than the median wage because its in the middle.

Did you know the 50 percent of people making below average wages now for the most part will not be the same 50 percent of people making below average wages 5 years from now.

 

It was a joke, I am with you. Median income by definition always has 50% below and above.

 

So we both agree that full employment will never happen and that its not the fault of capitalism. Excellent. Your last line about a socialist economy having work available, are you implying that there will be jobs for everyone? If so what makes you think that this is true?

I'm sorry I laughed when I read your statement "I’m not swayed by the human nature argument. If it were so then historically humans would show as tendency to compete as individuals and for most of our species history we have in fact cooperated to survive and prosper" You honestly believe that? Sure groups cooperate but they always end up competing with others, people found out its better to have someone watching your back. Companies compete with companies for business; people compete against others for jobs, spots in schools, to get a taxi, every day its just subtle. Ever heard of survival of the fittest, it exemplifies nature in its purest form... strong survive and the weak perish, its competition. Just because you don't see it doesn't mean its not there. And it exists in any economic system and is not the fault of said economic system, its because of lack of infinite resources.

I would argue that people have more influence over corporations than government. Sure you vote to elect a small number of the politicians in the capital, but everyday you vote with your dollars what goods you like, and therefore what companies you support. Politicians you can get rid of when their term is up, people can end companies at almost anytime by not purchasing their goods. You can say no to a company, you cannot say no to government... well you can but the ramifications are much worse then saying no thanks to any corporation.

Sam can be said for almost any economic system... damn unpredictable human nature.

Interest rate setting has vastly more effect than you realize, but I do agree they are quite a long way away from command economies.

Government didn't cause it alone, but holding down interest rates super low for over a decade made borrowing money cheap, thus when credit is cheap people buy more homes, more home sales means home prices go up, faster home prices go up the more attractive it is to take out another mortgage on the house as rates are low and the value is steeply climbing. Banks decide to bundle mortgages and sell them as securities, allowing them to get crappy loans off their books, which incentives banks to give riskier and riskier loans, because they can offload them on others. Home prices are skyrocketing so mortgage back securities look like excellent investments. They are purchased in gobs, trillions upon trillions. Risky mortgages start failing, bankers are starting to say ohh (*)(*)(*)(*). Realization of how overvalued the securities are as a large chunk of the mortgages in them will not be repaid. Their value plummets. Bank balance sheets crash. GFC all because the original signifier of risk, interest rates was manipulated by the fed. Ohh don't forget Freddie and Fannie, government backed entities were buying mortgages hand over fist encouraging the bubble. Now granted banks and people played a large part in it because it seemed like easy money... the path of least resistance, but it would not have been nearly a large a bubble had interest rates been set by the market.

 

The Capitalists are the deciders of where the economy goes, they have worked hard to get rich so they are granted this privilege.

If they feel there is a problem with government and the people voting against their interests, they will create a disconnect and keep money in their circles without letting it trickle out to the non-workers or dependents of the Government..

So Romney's failures as a candidate were the people's failures as an electorate.

 

Of course full employment will happen, just not under a capitalist economic system because full employment breaks capitalism by, among other things, causing wage inflation. There is no “fault” in it, it's just a necessary aspect. Remember in his critique of capitalism Marx never took a moralistic stance. I won't either, no need to. Capitalism must have an unemployment rate to function. That rate is probably known to those with an economics degree (not me because I'm not one of them) and I would think there is an optimum rate. Too many jobs for to few workers or too few jobs for too many workers have deleterious consquences in a capitalist economy, the unemployment rate has to be just right and the system functions.

Work for everyone in a socialist economy. I think it's true because the whole approach to society and its functioning – social as well as economic – is based on a totally different paradigm from capitalism. Now I agree that in the past total command economies which ended up as state capitalist systems have failed. Some that weren't as ideologically hidebound as, say the former USSR, which allowed a bit of freedom and flexibility in the form of a fairly rudimentary form of market socialism didn't do too bad at all. Lenin in that speech I mentioned, which from memory was to workers in a shipyard in Russia, was speaking in the light of the Bolshevik victory in the civil war. His point was that in the new economy of the Soviet Union all who wanted to work would find work and those who didn't want to work were parasites. The planned nature of the economy (in theory at least) meant that labour could be directed where it was required for the economic plans to succeed and was not left to the vagaries of the market.

I do honestly believe that humans, historically, have had to cooperate to progress and that competition is not inherent in human nature, at least not in a social sense. I think you've been taken in by the so-called “Darwinian” interpretation of capitalism, that it's somehow reflective of human nature. It's not and I'll explain my thinking.

You gave an example, or a descriptor, of capitalist society and then justified your own point by referencing human behaviour in a capitalist society. Bit of a circular argument innit? Let's go back in history a bit, to when humans were emerging as homo sapiens. We were a puny lot in terms of our effect on our environment. Individuals acting as individuals would have died out because they could not survive in such an environment. Cooperation by individuals in groups to ensure survival was fit behaviour. You seem to be referencing Herbert Spencer in your point about “survival of the fittest”. The theory wasn't about “survival of the strongest” or “survival of the most aggressive”. The theory was about fitness in prevailing conditions. The organism which adapted, that is “fit best” into the environment continued to exist and thrive, the organism which didn't adapt died out.

Your idea of “survival of the fittest” is simply a reiteration of capitalism's requirement for economic competition and the associated ideas of businesses that are not strong enough to survive in the competitive economic environment will die out. I understand how it works but I disagree that it has anything to do with either Darwin's or Spencer's ideas about “fitness”. That's what I mean when I say that contemporary human economic behaviour in technologically advanced capitalist societies is not somehow natural. That behaviour had to be invented and invented it was by Adam Smith.

Perhaps Smith's original ideas have been forgotten, it certainly seems that his idea of “enlightened self-interest” has been dumped by modern capitalism. Smith wouldn't recognise today's capitalist economies with megacorporations dwarfing government. I think he'd be appalled. But it suits the capitalist propagandists to trot out this “capitalism is all about human nature” line because if they can convince everyone that capitalism is quite natural then they can continue to get away with what they're up to – that is enriching a few at the expense of the many.

Before Smith's “Wealth of Nations” in 1776 (nice and easy to remember that year) economies had been based on barter, slavery, feudalism (slavery under another name) and mercatilism/colonialism and imperialism (basically wholesale plunder of someone else's land and resources under the protection of the state). Were all those systems reflective of human nature as well? No, more likely they were devised by human intelligence. Think about money. Is that part of human nature? No, of course not, it's a very handy invention that replaced barter. Some Native American tribes didn't even trade and preferred to be self-sustaining without the need to trade (barter) with their neighbours. Is that human nature? No, it's a considered position.

You mentioned a lack of infinite resources. True to a point. There are infinite resources, we just don't mention them much because they largely can't be captured, patented, produced and sold. The finite resources that feature so largely in economic discussions (and from memory the acquisition and distribution of “scarce resources” is central to any economic theory) can, on the other hand, be captured, patented and sold. And this is where capitalism will come undone. Again, this is not a moral perspective. When there's not much of those finite resources left market forces will not be able to operate an the idea of market economies will either die in its boots or fade out gradually, hopefully the latter. Finite resources necessary for human survival and comfort will have to be equitably distribute and the idea of market forces of demand and supply operating with each other to regulate distribution and consumption will be consigned to the dustbin of history. This will not be because of moral repugnance about capitalism (capitalism's best-advised socialist critics will acknowledge, on balance, that it has been largely beneficial for humans). It will be because a lack of finite resources will tender those twin laws irrelevant. Capitalism will then be replaced by another form of economic behaviour, just as capitalism replaced mercantilism and mercantilism replaced feudalism and so on. Human nature is immensely adaptive, it's why we're running the show on the planet. We invent economic systems that suit us at any given time and so we shall do so when capitalism is finished. If capitalism were embedded in human nature then it would have been there when homo sapiens first emerged. It wasn't, it isn't.

Influence of corporations and government. True enough, a corporation that relies on individual consumers is going to be sensitive to consumer behaviour. That's why those corporations spend a great deal of money and effort on learning how to manipulate human consumption behaviour. The whole discipline of “marketing” is all about such manipulation. Smart marketing is a bit like the best tailoring, you don't see the stitching but you certainly appreciate the product. You have to be an exception consumer to understand how you're being manipulated. But it's not evil so I'm not going to make a big song and dance about it.

What is evil is the influence of corporations on government. Monsanto has just benefited from someone slipping in a legislative assist for them in a bill totally unrelated to GMOs which has just been passed by your Congress. Your system allows that sort of legislative behaviour. I'm happy to say that in my country's legislative process that, for structural reasons, isn't possible. But you're stuck with it apparently. Monsanto had someone on the inside, a legislator, who was able to tuck that little piece of legislation in a bill that has been passed by Congress. That's the sort of influence that corporations have on legislature and goverrnment which goes well beyond the expected and accepted overt lobbying that any corporation or individual is entitled to do. You can get rid of individual politicians but there's always another one ready to be bought out by big money corporations. Oh it might not be money in the pocket, it could be funnelled to a PAC or a factory could be built in a particular district to enhance re-election chances. When business and government get too close it's called fascism.

I have to agree with your point about cheap credit. I am going to plead ignorance as to its origins though. I do remember having online discussions in forums before the GFC where people were discussing exactly the sort of behaviour you've described. It was a sort of orgy of consumerism. Frankly I could only read with envy as posters described their plans for purchasing various nice things.

As for the Fed. Have they locked Greenspan up yet? Just kidding. The origins of the GFC, I suggest, go back before any behaviours by Freddie and Fannie. I'd also suggest that the private banks may have had a fair bit to do with it as well. But history will inform us on that.

 

You obviously don't understand the role of government in society. Sorry to be so blunt but it has to be said.

 

I believe we had more success when a previous democrat administration increased taxes on the wealthiest and ran massive federal budget surpluses.

 

Didn't he threaten to keep government closed if Newt and Co. insisted on that balanced budget? Is that the same guy? Same guy who brags about the welfare reform law he repeatedly vetoed?

Besides, they cut spending as a % of GDP. Cutting spending and cutting taxes is the same thing. Your tax rate =

Fees, permits, tariffs, and license costs built into goods and services + Actual Taxes + Inflation Caused by Monetizing Debt + Opportunity Costs (Closed industries, Industries and Resources out of touch b/c of regulation) + Costs that you incur doing things that government forces you to do that you wouldn't otherwise.....I feel like there is more but I can't think of them.

NAFTA and the other free trade agreements were tax cuts. Spending decreases were tax cuts. Clinton wasn't much of a regulator. He got involved in subsidizing loans for the housing market, big mistake, but other then that he didn't force people as much as Hillary would have liked. You know, buying all sorts of insurance they wouldn't normally buy like Obamacare. (What was it before, 7% of people not covered, that is why the 100% are going with this plan?) He Republicans blocking him and reducing costs, while he was sealing deals all over the world that GB41 started. It was a good time, government doing less and less instead of the other way around.

 

Massive federal surpluses speak for themselves.

And, since when has it ever been fiscally responsible to wage war while lowering taxes?

 

Abolish the minimum age and you can have full unemployment.

 

How does that solve for any natural rate of unemployment engendered by capitalism?

 

I don't know what you consider Increase " during Bush/Cheney there was no increase in the national debt" .Why do you think Bush was hammered at the end of his term.
Because Bush along with Every single Democrat spent { Earmarks,Pork } like
drunken sailors.Bush amassed around $ 5 trillion in debt in 2 terms { 8 years }.
Obama has managed to spend { amass } around $ 6 Trillion in One Term { 4 years }.
However to Bush's credit under the watchfull eye of Rob Portman, Bush had
a Budget deficit of merely $ 161 Billion for 2007.
Obama averages around $ 1.4 Trillion in yearly deficits.

 

I waited to see. The Dow is up 261 points on the month, up almost 2%.

I guess you'll just have to wait some more for that warm heart.

 

Yeah, the fattest cats are having a real heyday on endless money printing, getting fatter and fatter. It's good to know they're all doing so well while the rest of us drift closer and closer to pure poverty, misery, and homelessness. The fats are good so, that's all that really matters.

 

With your record of predicting the stock market, it's unlikely you'll be joining them soon.

 

I believe Perfection in Money Management should be a form of holy grail under Any form of Capitalism.