Paul Krugman: “What’s good for the Dow isn’t good for America”

[applegrove]

Paul Krugman: “What’s good for the Dow isn’t good for America”

by Scott Eric Kaufman at Salon

http://www.salon.com/2016/07/15/paul_krugman_whats_good_for_the_dow_isnt_good_for_america/

"SNIP............



n his Friday New York Times column, Paul Krugman argued the stock market’s gains paradoxically “reflect economic weaknesses, not strengths.”

This paradox exists, he claimed, because there are “three big points of slippage between stock prices and the success of the economy in general.”

The first, and arguably most significant, is that stock prices reflect corporate profits, not personal incomes. The second is that they reflect little more than the availability of investments, and the third is simply that there is very little relation anymore between stock prices and actual investment.

The rise in the stock market under Obama, then, occurred in part because
these days profits often seem to bear little relationship to investment in new capacity. Instead, profits come from some kind of market power — brand position, the advantages of an established network, or good old-fashioned monopoly. And companies making profits from such power can simultaneously have high stock prices and little reason to spend.


.............SNIP"

[elleng]

1. Good to see this.'stock prices reflect corporate profits, not personal incomes.'

Haven't been reading Krugman recently, but here I think he's got it.

'profits come from some kind of market power — brand position, the advantages of an established network, or good old-fashioned monopoly. And companies making profits from such power can simultaneously have high stock prices and little reason to spend.'

[ck4829]

2. Case in point back from 2003, "Stocks surge at approach of war with Iraq"

http://articles.baltimoresun.com/2003-03-18/business/0303180326_1_war-with-iraq-investors-toll

[Warpy]

3. The Dow goes up because there aren't many places for concentrated wealth to go

I would imagine it's worth less than half what today's numbers say it is.

For those of us who are living on the earnings, the face price of a share of stock doesn't mean much, it's just a number that changes every day. If we need to increase our income, we need to increase those stock earnings and that means we need to find a way to increase demand for the goods or services that company provides. The easiest way is by raising wages.

It's just another example of how the money pump works at all levels, but it works from the bottom up. Give money to the top and they hoard it, driving up the prices on antiques, rare wines, and stocks. No one benefits from this.