Today’s Dow record high close of over 16,000 shows the deep economic divide between Wall Street and middle America, as manufacturing jobs struggle.
The Dow Jones Industrial Average rallied more than 100 points to close above the 16,000 mark for the first time in history, but optimism over the Fed keeping its bond-buying program fueled the new Dow record high close, not widespread economic growth and prosperity.
While the middle class, working American continues to suffer in the Obama-economy, Wall Street is enjoying a big rally this year. The Dow is up more than 22 percent this year and has rallied 145 percent since its bear-market low in March 2009.
Naturally, as well as the investor class, this benefits small retirement plans held by Americans across the country, but it isn’t that simple. Two major economic deficiencies are preventing Americans from enjoying widespread prosperity that is traditionally associated with American economic history.
For starters, the Dow record high is not reflective of the real economy, and the latest news doesn’t comport with the lack of success in the labor market. What good is a Wall Street rally if Americans do not have any jobs or sufficient wages to feed their 401K, if they even have one?
The October jobs report released by the Bureau of Labor Statistics found the economy added 204,000 jobs, but the unemployment rate — which apparently has been faked by bureaucrats for years now anyway — rose by 0.1 percent to 7.3 percent, matching economists’ forecasts. The labor force participation rate – a measure of the proportion of the population employed or seeking employment – dropped to 62.8 percent, which is the lowest level since March of 1978.
Today the Philadelphia Fed reported manufacturing in the mid-Atlantic region slowed to 6.5 in November, down from 19.8 in October. Economists polled by Reuters expected growth to grow at a much swifter pace of 15. The latest manufacturing index followed the New York Fed “Empire State” index, which showed the state’s manufacturing sector unexpectedly contracted in October, according to a report released last Friday from the New York Federal Reserve.
The New York Fed’s “Empire State” general business conditions index contracted to minus 2.21 from 1.52 in October. Friday’s index report, which is one of the earliest, most-indicative measurements, was the first negative reading since May, and also took economists by complete surprise. Economist polled by Reuters had forecasted an index of 5.0, obviously way off.
In manufacturing index measurements, readings above zero show expansion, while those below indicate contraction, and it certainly was. Which brings us to our next economic challenge.
While the Fed pumping money into the equities market certainly helps the rich profit from investment income, it increases inflation and offers next to zero for interest on savings, reducing the saving power of the everyday American. So, looks like even those Americans who are fortunate enough to have a 401K must take greater risks to keep pace with current and future inflation.
The trend is more than likely to continue, with the Federal Reserve Vice Chairman Janet Yellen clearing the Senate Banking Committee to become the next chair of the central bank. The move now clears the way for a full vote in the Senate later this year. And since the Democratic Party has invoked the nuclear option, ushering in a new era of Democratic tyranny, Janet Yellen is going to ensure the rich continue to get richer by continuing Ben Bernanke’s highly accommodative monetary policy that is the only reason stocks are 25 percent higher this year.
This wouldn’t be so dire if the U.S. economy was creating good-paying, middle class jobs that historically fueled the wealth of the American middle class, such as manufacturing jobs. We will be waiting on the Midwest index to be released next, but despite economists’ expectations, we have no reason to believe it will be any better.
This divide is the only true promise of collectivism, which the modern Democratic Party and President Obama promised would lead us to a utopia with receding ocean levels. In the Obama-economy, approximately 70 percent of all the jobs created have been part-time jobs, another “unintended consequence” of the collectivist achievement of the century, ObamaCare.
Under President Reagan, GDP growth averaged over 7 percent, even without changes being made to the calculations in order to “fake” another economic number. Contrary to what we are told about supply side economics, wealth did trickle down during the Reagan recovery that officially began in 1982, unlike the direction of wealth we have seen money travel under Obamanomics.
Real per-capita disposable income increased by 18 percent from 1982 to 1989, with the American standard of living increasing by almost 20 percent in only 7 years. The poverty rate declined every year from 1984 to 1989, dropping by one-sixth from its peak of 15.2 percent, which I examine in detail in Our Virtuous Republic. The stock market more than tripled in value from 1980 to 1990, a larger increase than in any previous decade. However, it was a real reflection of prosperity, not future inflation as the Dow record high now shows.
In fact, America suffered crushing double-digit inflation, with the CPI registering at 11.3 percent in 1979 (thanks to our last collectivist president and a collectivist Congress), and 13.5 percent in 1980, which totaled 25 percent in just two years. Just as the progressive Washington elite economists tell us Obama was dealt the worst economic hand of any U.S. president, so they said of inflation during the Carter administration that was just a new normal. Except, it wasn’t.
People’s Pundit Daily has long reported on the real economic situation around the country. Data released by the Associated Press revealed 4 out of 5 American adults struggles with joblessness, near-poverty or reliance on welfare for at least parts of their lives, “a sign of deteriorating economic security and an elusive American dream.”
Make no mistake, the Dow record high 16,000 level reflects future inflation thanks to collectivist policies and monetary policies. Thousands of years worth of economic history will not be wrong because Paul Krugman, Ben Bernanke and Barack Obama says so.
Major Averages: Performance from Bear Market Low
|
Last |
9-Mar-09 |
Chg |
%Chg |
|
| DJIA |
16009.99 |
6547.05 |
9462.94 |
144.54% |
| S&P 500 |
1795.85 |
676.53 |
1119.32 |
165.45% |
| Nasdaq Comp. |
3969.16 |
1268.64 |
2700.52 |
212.87% |
| DJ Transports |
7173.36 |
2146.89 |
5026.47 |
234.13% |
| Russell 2000 |
1119.62 |
343.26 |
776.36 |
226.17% |
Looks like a recovery, doesn’t it? No, it really doesn’t, and Dan Mitchell gives a must watch comparison of Reaganomics vs. Obamanomics.
