Some of my friends who are bullish on the economy keep posting things about how great this year has been. However, this is the time of year when we see/hear about businesses closing or going bankrupt.
That’s the post Christmas blow-out. Most businesses make at least a third of their annual income around Christmas (4th quarter).
Sure — the stock market has been going up and setting records … but what does that mean?
“The Stock Market” usually means the Dow-Jones Average. That is a list of 30 industrial businesses — and is not really relevant in today’s world.
After WWII, American had lots of auto factories and manufactured steel, and then the electronics boom started — and we had a lot of production before we shipped it all overseas to chase cheap labor.
Now the economy is good — for certain people. If you own a business in Fortune 500, and/or a lot of blue chip stocks, you are probably getting pretty good dividends and earnings.
If you work for those companies, their wages have not kept up with the profits the company is pocketing. In fact, in many cases, they don’t keep up with inflation.
Here’s the real pulse of the economy:
“If you keep noticing more going-out-of-business sales, there’s a startling reason: Forever 21, Walgreens, Dressbarn, GameStop, Gap and other chains have announced nearly 9,000 store closings in 2019 — way more than we saw during all of 2018.”
https://moneywise.com/a/retailers-closing-stores-in-2019
Meanwhile the Federal Reserve keeps pumping money into the economy to keep the numbers up.
Report in September: “By pumping more dollars into the cash-strapped lending market, the Federal Reserve brought the market money rate back in line with its funds rate. What started as a single act on September 17, 2019, has now snowballed into four straight days of repo agreements to inject more than a quarter of a trillion dollars’ worth of capital into the system.”
Report in November:
The Fed’s monetary juice has tied directly to the rise in stocks
Nov 7, 2019The Federal Reserve has been pumping billions into the financial system after the mid-September tumult in very short-term lending markets known as repo. As the central bank’s balance sheet has …
The reason? When the economy is good, incumbents are usually re-elected, and 2020 is an election year.
When the economy is bad, the incumbent is usually voted out of office.
This has nothing to do with other factors — like impeachment hearings or personal scandals. But in the face of those factors, a booming economy could really help out.
So when people are telling about the great economy, they are probably repeating what they want to hear according to their belief system — and not telling you what is actually going on.
Leave a Comment