If you are one of those who have always thought of the share market as nothing but a casino, I must offer to you that whatever casino like atmosphere existed before, oh, say, 2007, is as nothing compared to now. One reason for this is that the present stock market is the province of an even smaller coterie of powerful players than before, players who are being bankrolled almost exclusively by you and me. What's more, the house money that this group of players have been handed for free is being deployed into the stock market based on factors that have absolutely nothing to do with the real economy. Short to intermediate term ebbs and flows in the stock market have always been dictated, to a greater or lesser extent, by liquidity flows, but now, as the unofficial government policy towards the dollar is to manage it into a controlled oblivion, a gambit that I believe is destined to fail spectacularly, the stock market now functions as nothing more than a kind of inverse dollar commodity fund.
Who can be surprised as the U.S. economy is on government induced life support that is barely keeping the patient from experiencing a total collapse. As a result, despite the smoke and mirrors engaged in by cretinous Wall Street cheerleading oufits like CNBC, forward operating earnings, are a fiction, and will not come close to justifying present prices. Worse still, the appalling mark to market accounting fantasy that the banks, and many others, have availed themselves of, allows for ever more absurd acts of share levitation.
But those are but mere tactics, albeit obscene ones, employed by The Powers That Be for the purpose of obfuscation. The real reason that reality will not, at least for now, be allowed to intrude, is because the stock market is perhaps the key prop employed by The Powers That Be to bamboozle the American Public into thinking that the U.S. Economy has "recovered," and that all will be as it was before the annus horribilus of 2008 cut the value of most people's equity portfolios in half. Even as the PTB have set in motion forces that guarantee a future where our purchasing power erodes faster than a seawall in a Category 4 Hurricane, they will try, at least for a time, to make those with Roth IRAs and 401Ks feel better about their prospects. In the meantime, the stock market has become a kind capital market manic depressive, down approximately 66% percent from its all time (nominal) highs from October '07 to March '09, and up almost the same amount in percentage terms in the eight months from this year's late winter lows.
14 comments:
Of course one could say:
"fool me once, shame on you, fool me twice...".
It seems the only people actually buying American stocks today are the banker's quants and their computer traders.
Back in the real world, US stock continue to remain quite unpopular despite the positive performance... At least if (in-out)flows of funds are any indicator of real world behavior.
Let's see if Joe the plummer gets it wrong this time ;-)
I think the key issue for me is the U.S. government has engineered things so that what was an important capital formation mechanism, albeit one that has always been plagued, here and there, by dodgy practices and fraud, to be ruined, all for the purpose of trying to fool we sheeple into thinking the economy is far healthier than it actually is. Call it a scam for a sham.
Yes, so where where has the new mechanism gone? ;-)
It is most definitely still there
You think so, eh? Capital formation ain't what it used to be brother. And we are in such a box now, that any capital projects that make possible the introduction of new technologies, aka creative destruction, will put even more people out of work, and in turn make what is already a debt service nightmare even worse.
1. Edwardo, I am not your adversary. I never will be so don't misunderstand me. I may have fun with you from time to time, but that is all I am doing.
2. I am a little confused why you would worry about putting people out of work now when you get so upset about how we bailed out the banksters? Everyone would have lost their jobs had we not- perhaps you see this differently.
... And again, please do not misunderstand me, I called my representative several times to tell him to vote "no" on the bail outs- Indeed I don't even know any banksters or anyone who works on Wall Street.
3. re: the new funding mechanism
Remember Hell's analogy of the real economy vs. snake eyes and smoke and mirrors?
Welfare has been a way of life since before society was called society.
I might suggest Hell has described the mechanism in his last post on energy from the African deserts.
1. Edwardo, I am not your adversary. I never will be so don't misunderstand me. I may have fun with you from time to time, but that is all I am doing.
-No worries, grasshopper. But that was nice of you to say just the same.
2. I am a little confused why you would worry about putting people out of work now when you get so upset about how we bailed out the banksters? Everyone would have lost their jobs had we not- perhaps you see this differently.
-There's no contradiction, though it might seem so. The banker's were, and are, a great menace, and if the price paid to have that menace taken a down a peg or three, or even, if one can, for a moment, be allowed to dream, wholly removed, it would have been well worth the cost. Even had it meant that the official unemployment stats skyrocketed to twice the present rate it would have been a worthwhile trade, because it would have entailed a concomitant liquidation of a massive debt overhang.
And thrown into the bargain we would not have had government pissing money into an infernal alphabet soup (TALF, TARP, etc. etc rat hole. Yes, I would have said those outcomes, in the aggregate, were well worth the cost, simply on the grounds of equity/fairness, and because the nation would be in a much better position going forward.
... And again, please do not misunderstand me, I called my representative several times to tell him to vote "no" on the bail outs- Indeed I don't even know any banksters or anyone who works on Wall Street.
-Well, that's good, otherwise I might be able to associate with you. That was a joke.
3. re: the new funding mechanism
Remember Hell's analogy of the real economy vs. snake eyes and smoke and mirrors? Welfare has been a way of life since before society was called society.
Perhaps. but first define welfare? Welfare for who? Who paid for it, and at what cost, and and what percentage of the, not as then labeled let alone tabulated, GDP did it come to?
I might suggest Hell has described the mechanism in his last post on energy from the African deserts.
-I've read it. I think it has merit, but I also think Hell is perhaps a bit over attached to his vision.
-Otherwise I might NOT be able to associate with you.
I just don't see it as real money so we tend to look at it a little differently.
Similarly I just don't see how reforming the banking system without reforming everything else does anything, but that is obviously one of those areas where we disagree.
I just tend to see the banker issue as I see all the hullabaloo about the funding issue in health care. I think there is a little to be saved, but in the end not a lot and if we want to make real large changes, we need to reform health care itself, not the way we pay for it.
Again, just my viewpoint.
re: "I also think Hell is perhaps a bit over attached to his vision."
I tease him on this a lot as well, but actually I do share much of his vision- I think flipper is in trouble (Indeed I remember when there was something called a cod fishery off your coast).
... I am not sure if global warming is the most immediate of the issues that needs addressing to save flipper, but that is another discussion alltogether.
My big issue with his visions is he seems to refuse to admit all the implications of of his own observations, which was rather succinctly stated in Okie's link Does Economics Violate the Laws of Physics?
Namely:
"In fact, the small world of biophysical economists seems to agree that energy and resource conservation is pointless in the economic system as it is now construed, contrary to what one might expect."
But this means one would have to address the issues I keep bringing up (which admittedly are rather unpleasant) and I can see there is just no stomach for that anywhere.
Reforming the banks does not address this issue.
Conserving energy does not address it either.
And so the band plays on
Forget about whether it's "real" or not. The effects of spending all that unreal dough are fearsome.
No, we don't disagree actually. We agree that banking reform is part of a much larger societal reform effort that is needed. The problem I have with your way of going about it is-and here I may have it wrong-that, at times, you appear to explain away, to some degree, the ill effects of the banking sector. I assume this is because you feel there are other and bigger fish to fry, i.e. flipper.
If I perhaps seem overly absorbed by the woes of our society vis a vis the banking sector, it's only because my sense is that the banks are exercising an undue negative influence on all of us presently. "Doing God's work" don't cha know.
Economics has been, to make it short and bitter, co-opted, Keynesian and Monetarism in particular, by the PTB/gubbermint, because it serves their purposes. But, again, we agree, as per the thinking of Erlich and Hardin, whose ideas have now been confirmed by the rigors of physics, that the "discipline" of Economics, as most of us have known it, is woefully inadequate in the present reality.
"you appear to explain away, to some degree, the ill effects of the banking sector."
I think this may be one of appearances.
Actually, the more I have learned about all these issues, the more I have come to like the idea of a currency gold standard and gold seems as good as any. But realize I can be talked into any type of monetary standard or fiat standard if other things are addressed.
The notion of one change is always dependent on other changes.
I do see reforming the banking sector will reform the issues the banking sector is causing in the real economy, but this is a two way street and it will not address the issues in the real economy that are causing problems in the banking sector. These will just spill to somewhere else in the economy.
And to some degree I think it is these issues which are causing the problems in the banking sector which are then spilling to the real economy in the first place.
The chicken and egg aspects of this whole thing can get a little much at times.
As for the idea that there might be a better system than the one we currently have, I am sure you are aware this is epistomologically problematic.
For it still has to do with what linguists refer to as "aspect" or which you and I tend to think of as viewpoint. "From who's viewpoint" are you talking about when you are talking about change.
And while our individual viewpoints may or may not concur and or may or may not be improved or worsened with system changes, when we add EVERYONE's viewpoint together, the sum total is zero sum- e.g 50% will be winners in total and 50% will be losers.
And it is really hard to get angry in such a scenario since I know someone will lose for each of my wins and vice versa.
Or as you like to remind us of econ's most fundamental axiom: "there is no free lunch".
Also re: Economics has been, to make it short and bitter, co-opted, Keynesian and Monetarism in particular, by the PTB/gubbermint, because it serves their purposes.
Agreed
I guess my point is we all do this and I am trying to say lets just call a spade a spade, admit the boundary condition issues and let the chips fall where they may.
Take Hell. He likes to remain silent on totalitarianism, and share what he believes is a kinder and gentler form of Malthusianism. Yet he makes "I like the Japanese approach" comments (forgetting for a moment that their fishing ships inconveniently have a way of poaching the fish of other people's waters).
But more significantly, Totalitarianism can have many faces.
If we are going this way, call a spade a spade.
Putting a happy face on it is every bit as dishonest as the PTB have been with the current economic/monetary system twisted to serve their own ends.
In the end most of us realize there will be restraints on choice (to use a politically loaded term in an entirely different way).
Some of course will never accept this fact.
zero-sum
With respect to your comment, Thai,
"I guess my point is we all do this."
This is precisely the sort of broad rationalization I was referring to in my prior post. Having said that, and since we are into the business of calling a spade a spade, I say that, while we all twist things to suit our purposes, and subsequently lie to ourselves (and one another) about what we have done and why, we don't all engage in this sort of very human behavior-either within groups or individually-to the same degree or to the same ill effect. My view is that those differences in scale and effect are worth noting, and that we should not elide them.
I am not sure I am ready to slap the draconian label of totalitarianism on the phenomenon described at the link, but the "Fat tax" certainly smacks of an oppressive authoritarian mode of government.
The doing gods work comment is bizarre, no doubt about that.
And I don't disagree with what you are saying either, it is a matter of aspect framing.
We are simply looking at the same issue from different viewpoints though I am not sure the viewpoints necessarily disagree when the angle of aspect shifts.
Be well
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