So how can the Dow 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.
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.
Cross-posted from Robert Reich's Blog.
I have posted this idea before and I will again. End the flat tax on the wealthiests (the top marginal rate) which is the same percentage for those who make 400,000 and those who make $4,000,000,000! The tax rate can be on a curve that approaches flat at 100%as gross income approached ininity. Set the after-tax net income to a multiple of the median income. At double the cap the tax is 50%, at 4x 75%, 10x, 90% etc... If the net income was pegged to median income then the superrich will spend all their energy on creating more and higher paying jobs.
Proposed For all income >= 40 x median income (MI)
Tax Rate = (TGI -20 x MI)/(TGI/20xMI)
TGI = Taxable Gross Income
TGI = Non capital gain income(NCGI) + taxable capital gain income(CGI) - Social Good Income
Social Good Income = Rewards or Patents for significant (!) inventions and discoveries (advancement in green technology, cures for fatal diseases, etc..)
Taxable capital Income = CGI x (CGI/(NCGI+CGI))
All Incomes
The USA is losing the Economic War! The USA must re-industrialize, or become a third world nation of mostly unemployed beggars.
The USA has lost the World Technology Leadership! The USA must change the emphasis of our education systems back to technology and science.
The USA is Bankrupt! The USA is selling our privately owned land and other assets to pay for imported products (rather than have US citizens work to produce the things that we consume) and also to pay for growing US government expenses that are in excess of our federal tax collections.
When the USA has no more privately owned land and other assets to sell to foreigners in industrial countries in return for freshly printed US T-Bills, Bonds, or other Securities, those foreigners will not buy more of our freshly printed US T-Bills, Bonds, or other Securities and we will not be able to get any US dollars to pay for our government expenses or our imported consumer products.
The USA is Committing Economic Suicide! The USA will become a third world nation when our US dollar loses all of its purchasing value.
It will be interesting to see how the winter holiday fare. Our entire family has agreed to not exchange gifts this year. Last year we probably spent around $50k in gifts in total, and I can't imagine we are the only ones planning on cutting back on gifts.
While I normally don't like government programs, it is clear that we need to fix our schools, roads, bridges, power grid, and rail system. Any trip to a European country and it is clear how far the US has fallen behind.
The USA has created an economic situation that US gold; US currency; stocks, title to US real estate, businesses, jobs, and other privately owned US assets are leaving the USA to pay people in foreign countries to manufacture the things that US citizens import and then consume. We must change this situation or we will become a post WWI Germany economically. This could happen overnight as soon as we have sold title to all of our privately owned real estate, farms, agri-businesses, food supplies, dairies, forests, industries, breweries, hotels, factories, casinos, financial institutions, retail businesses, and all of the other privately owned assets located in the USA in return for the foreigner's US dollars that they earned by making things for US citizens to consume, and then we will have nothing else of value left to sell to the foreign industrialized nations.
Sir Josiah Stamp
"Let me issue and control a nation's money and I care not who writes the laws"
Mayor Amschel Rothschild
"Whoever controls the volume of money in our country is absolute master of all industry and commerce, and when you realise that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate."
James A. Garfield, 20th President of the US, two weeks before his assassination
" I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation and then by deflation, the banks and the corporations that will grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered. THE ISSUING POWER SHOULD BE TAKEN FROM BANKS AND RESTORED TO THE PEOPLE, TO WHOM IT PROPERLY BELONGS"
Thomas Jefferson
This is a documentary from the 90s that tells the whole scary story...a MUST-SEE! Audit the FED!!
http://video.google.com/videoplay?docid=-515319560256183936#
It irritates me when my banker refers to Banking, Stock Trading, Insurance and other financial businesses as "industries", since they do not create anything, except worthless toxic asset paper financial "products".
The Wall Street Stock Exchanges and Banks are essentially corrupt and should have been allowed to close in Bankruptcy. Wall street is too corrupt and inept to be salvaged. Stocks should be delivered to the registered owners.
US Corporations should abandon Wall Street, buy and sell their company stocks themselves, and then allow new stock brokerage firms to slowly be created and evolve with tighter regulation and more penalties to prevent future Wall Street type criminal atmosphere of entitlement.
Houston, Atlanta, Dallas, Chicago, or some other different location might be a better location for a clean new start.
Where are the neocon thinktank conferences, with their smart and business-savvy CEOs, getting together to dig us out of this economic mess?
Why aren't CEOs of mega, international, national, large and medium sized corps gathering to find a way to provide jobs for everyone?
Oh... that's right. THEY'RE the one who got us into this mess in the first place. They and their GOP shills in the government who decided that deregulating everything and that laissez-faire capitalism was the end all and be all.
Funny how reality kicks in and proves their mythology a gigantic lie -- which affects not just a couple dozen people, but an entire planet.
How many things in your home will last more than five years?
How many of those things that will last more than five years were purchased within the past twenty years versus those that have been passed down to you from your elders?
Do you have an old tube television or a giant flat screen? (can you even buy an old tube tv anymore, or have our standards been set for us by the industry?)
How much of you own was made in a foreign country?
How much of the meals you eat are pre-packaged for your convenience in plastic, which is made out of oil?
How many times a week do you eat out for convenience rather than cooking in?
Do you have a vegetable garden? Do you have time to garden?
When your doctor doesn't provide a cure, do you go back and pay again, or do you demand your money back?
How many vacations did you take last year?
WE are THEY.
US citizens elected the congressmen and senators who voted for these laws that were generally created in the past four or five decades. Both major parties are in favor of free trade and a clean environment. Both Democrtats and Republicans voted (equally?) for this legislation. I do not know what the Prohibition Party's position is on this issue, or if that party still exists.
There was an era in the 1960's when people living in Pasadena, Texas said that their refinery pollution smelled like jobs, money, food, housing, and college educations for their children.
I hope people are listening to you...
Combine these two ideas.
1. Kiva-ize the world. Kiva does microcredit which recycles loans back to the lender and keeps building economies at the grass roots. Beats most philanthropy.
2. Institude a global guaranteed income floor administered by IMF or World Bank, keyed to cost of living.
Nations that or corrupt or genocidal would affect the floor. Their victims would get enough to escape their deleterious rule and enough to resettle somewhere else without necessitating huge refugee camps.
If you agree I will let you in on my third idea.
Rewrite the Geneva Convention to outlaw any form of war that inflicts more harm on an enemy than has been already inflicted, The Bush war would have had a limit of around 3000 lives.
What do you think?
You know, I've found it's much much more difficult to have the vision and courage to come up with new ideas, however farfetched, than it is to sit back and knock them down. Criticism is easy.
I'll add another one and brace yourself. This one's way out there. We improve our technology as a species to the point were it can provide for our human needs, food, shelter, energy, education and comfort to the point where we can eliminate all forms of currency and move to a resource based economy. Whoa.
http://www.thevenusproject.com/a-new-social-design/resource-based-economy
People are getting poorer and the rich, who may or may not be people, are getting richer, still, again, and still. By "still" I mean since Regan.
The other day I saw a couple paying for basic food with rolls of change. Is this the change we were promised?
This is the system you wanted. You cheered on the Reagan liars as long as you were involved. Now that you are not involved, it is Obama's or someone elses fault. What happened to the belief that the angelic, altruistic corporations will police themselves? For more than 20 years, the dimwit social conservatives have screwed this country into a corner. It will take more than 9 months for the 'new' dimwit to clean it up. Why do we teach our children not to be selfish, greedy, and stupid, and then elect the same in government. How do you feel now that you have figured out that your government is just one big get-rich-quick scheme?...And it isn't you getting rich.
The US Government essentially became bankrupt when the US stopped redeeming our US T-Bills, US bonds, US dollars, and etc. for gold from our gold reserves at Fort Knox in 1971 or 1972. The US government then declared that the dollar is now backed by the "full faith and credit of the USA" (aka Junk Bonds). We now redeem foreign earned US dollars and other freshly printed US currencies for the title to privately owned US property (real estate, farms, agri-businesses, food supplies, dairies, forests, industries, breweries, hotels, factories, casinos, financial institutions, retail businesses, etc.) and other assets located in the US, instead of gold. This allows US citizens to sell assets generated by previous generations in lieu of US citizens having to work to produce the things that US citizens consume. These privately owned US located assets are finite, and the day will come when there is nothing left to sell to foreigners.
Without businesses providing jobs, everybody would have to live off of the land. Any family, tribe, country, etc. and its individual members can prosper or become debt ridden in accordance with their industrial behavior, government spending behavior, and/or other economic actions of the leaders of that family.
The only thing that will create/save US jobs, preserve/restore the buying power of the US Dollar is reversing the trade deficit, reducing US government borrowing, and reducing the US government spending in order to start re-building the USA gold reserves which is the basis of the buying value of the US dollar. Only a positive balance of trade will eventually create US jobs. The only way that we can accomplish exporting US made products is to re-industrialize and make these products, hopefully with mostly US materials & Labor. The only way that our products will be sold abroad is if these products are either technologically superior, or cheaper. US citizens must manufacture and sell things to foreign countries in order to get US currency back from foreign nations in order to buy back the privately owned US assets sold to and now owned by foreigners.
Many entrepreneur owners of Restruants and retail stores here in Houston are Engineers who decided that engineering was no longer financially rewarding and left the Engineeirng profesion for more lucrative professions and businesses. My dentist is an ex NASA electrical engineer.
Maybe certain insiders have made money, but the indices are way down in inflation adjusted terms and always has been. The 90s were the most extended period of gain in the indexes. The vaunted 80s just kept up with inflation.
Once Main Street hopped on the bandwagon that is when the scam accelerated.