Bad News, Good News, and Class Conflict
- Soft Economy? No Problem First the bad news: The economy is weak. And now the good news: The economy is weak... Oddly, the same problem that worries many investors over the longer term is what encourages some for the short term: a soft economy. The reason is that an ailing economy requires the Federal Reserve to keep its short-term interest-rate targets near zero and continue pumping billions of dollars into the financial system. —E. S. Browning, “For Stock Investors, Bad Economy Isn’t Bad,” Wall Street Journal, November 9, 2009
- The Economic Elite Vs. The People of the United States of America
John Miller, Dollars & Sense
So the Journal has noticed that bad news on Main Street is good news on Wall Street. What’s next—will the Journal report that “the history of all hitherto existing societies is the history of class struggle”?
But the Journal reporters still have some work to do before they earn their merit badges in Marxism. First off, any economist worth her salt will tell you that stock prices are a leading economic indicator that goes up ahead of an economic recovery. Stock prices (measured in the chart to the right as the change in the Dow Jones Industrial Average) rise in anticipation of improved corporate profits, as investors want to buy in early. And the unemployment rate is a lagging economic indicator that goes down only after the economy heats up.
Employment lags because employers do not want to hire more workers until they are sure that the expansion will hold, and in the meantime they push the existing workforce harder and expand hours. So it’s not surprising to see stock prices and unemployment rates moving together as the economic recovery is just getting under way.
Related:
Series: The Economic Elite Vs. The People of the United States of America - Part I, David McGraw, Amped Status<>
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