Robert Reich, Salon: "Why Wall Street is booming while Main Street suffers"

[Amerigo Vespucci]

Why Wall Street is booming while Main Street suffers

Consumers can't buy, and businessmen cry socialism, but the government is keeping money moving and the Dow strong

By Robert Reich

http://www.salon.com/opinion/feature/2009/09/22/reich_dow/



The interior of the largely vacant Summit Place Mall near Pontiac, Mich. (AP)

Sept. 22, 2009 | So how can the Dow be flirting with 10,000 when consumers, who make up 70 percent of the economy, have had to cut way back on buying because they have no money? Jobs continue to disappear. One out of six Americans is either unemployed or underemployed. Homes can no longer function as piggy banks because they’re worth almost a third less than they were two years ago. And for the first time in more than a decade, Americans are now having to pay down their debts and start to save.

Even more curious, how can the Dow be so far up when every business and Wall Street executive I come across tells me government is crushing the economy with its huge deficits, and its supposed “takeover” of healthcare, autos, housing, energy, and finance? Their anguished cries of “socialism” are almost drowning out all their cheering over the surging Dow.

The explanation is simple. The great consumer retreat from the market is being offset by government’s advance into the market. Consumer debt is way down from its peak in 2006; government debt is way up. Consumer spending is down, government spending is up. Why have new housing starts begun? Because the Fed is buying up Fannie and Freddie’s paper, and government-owned Fannie and Freddie are now just about the only mortgage games remaining in play.

Why are healthcare stocks booming? Because the government is about to expand coverage to tens of millions more Americans, and the White House has assured Big Pharma and health insurers that their profits will soar. Why are auto sales up? Because the cash-for-clunkers program has been subsidizing new car sales. Why is the financial sector surging? Because the Fed is keeping interest rates near zero, and the rest of the government is still guaranteeing any bank too big to fail will be bailed out. Why are federal contractors doing so well? Because the stimulus has kicked in.

[havocmom]

1. K&R

Thanks for posting

[unblock]

2. but the government can't do anything right,... right?

big business may screw the consumer, but they always seem to be in bed with government.

[Zenlitened]

3. K&R.

[MisterP]

4. k&r, and is that a ginormous Tom Servo? n/t

[Blue_Tires]

5. lol at that!

[naaman fletcher]

6. its all worth pointing out..

that the market is a leading indicator.. that is, it advances ahead of good news and a good economy. So even if we don't see good numbers now there is a good chance we are actually off of the bottom and that we'll start seeing good numbers in the next 6-9 months.