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More Random Economic News

By December 5, 2023Commentary

If you watch the stock market over an extended period of time, you know it is basically a rigged game, most stocks are owned by institutional investors–funds of various types–who in turn get money from rich families and pension funds, etc.  They play the game to ensure that they rarely lose money and the position of the stock market at any one time tells you nothing about the state of the economy.  When things get really bad the market eventually suffers a horrific crash, and when they look good stock prices soar beyond any reasonable valuation based on fundamentals.  In between, it is all about figuring out how to run prices up and occasionally take a profit.  Hedge funds, which short stocks as well as buy them, and derivatives trading add further obfuscation to what is happening.  So the stock market is not a good indicator for the health of the economy or what is happening for the vast majority of Americans.

Other indicators reflect the true rottenness beneath the surface.  Our national debt and interest costs are literally soaring, with no evidence that Congress will exercise any spending restraint any time soon.  Those interest costs aren’t going to go down significantly no matter what the Federal Reserve does because that market will be increasingly dominated by supply and demand factors, and those buying Federal debt are worried about our fiscal condition.  High interest rates contribute to inflation as does high wage growth.  Prices are not going to literally retreat, in fact every business is going to be forced to continue to raise prices to maintain profitability.  And your taxes, which are the price for government, are going up very rapidly–sales taxes, property taxes, income taxes, license fees, etc.

As this Zero Hedge post points out, what matters to the average person is puchasing power–how much can they buy or pay for out of their income.  And that has declined, really pretty dramatically over the last three years for most people.  Whatever wage increases they have received have not kept up inflation in necessities–housing, food, clothing and medical care.  And as the post explains, that is what really matters to people.  (ZH Post)

Meanwhile, in the real world the economy is weakening.  Factory orders have declined and would be even lower if not for defense spending for Ukraine and Israel aid.  (ZH Post)  Retail sales are looking weak.  Jobs data is getting weaker, we will see a new report this morning and another Friday.  This government-debt fueled spending binge had negative consequences and further government spending can only hold off the consequences of that debt for so long.

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