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2008-10-15

The Stock Market is not The Economy

SEATTLE, Washington - I keep hearing this constant drumbeat about how horrible the economy is. This is usually based on looking at the stock market. Even on the sports station, KJR, all the hosts are talking about our disastrous economy.

Can anyone cite for me the evidence of a disastrous economy? GDP grew at almost 3% last quarter. For comparison, during the Great Depression (and people who gain from misery keep comparing today to the Great Depression) there was an almost 30% contraction in GDP.

Unemployment is around 6%, a bit higher than recent years but still right around the 20 year average. Yet I keep reading news stories from places like MSNBC and ABC about the disastrous job situation.

Yes, the stock market is down and showing a lot of volatility. The volatility is a natural outgrowth of the uncertain situation regarding bank lending and the various rapacious and boneheaded government responses to the bank situation.

The evidence that we're going to hell in a handbasket seems to consist of the Secretary of the Treasury, Congress, and the media telling us that we're going to hell in a handbasket unless our wise government takes decisive action with hundreds of billions of dollars of our wealth.

While the media keep telling you about the stock market - oil is at $72 a barrel today, down around 50% from just a few months ago. A few months ago, we were all doomed because of high oil prices - it made food too expensive, we all had to throw our cars in the river, etc. Myopic publications like The Stranger were declaring the end of the automobile era, declaring that we should take whatever transit measures were being shoved down our throats, because oil had gotten too expensive and there's no way the price of oil ever falls.

1 comments:

Christine said...

Have you been to different neighborhoods in Seattle on a weekday night to a bar or restaurant compared to a few months ago? They are dead!

People seem afraid to spend money right now which is hurting our local economy. Yes, it is people's fears based on the stock market. But their spending habits will start to affect the economy in a big way very soon.