Quote:
|
Originally Posted by Undertoad
The stock market is not the economy. The numbers that are important are GDP, inflation, money supply, unemployment.
|
Those same numbers (GDP, unemployment, etc) in early 1990s said the economy was seriously recessionary and had no productivity increases. Greenspan was saying the economy was otherwise. But again, those ‘lagging indicators’ did not report reality for many years. During those years, the stock market increased constantly from 2800 in 1990 to 4000 in 1994. Why? UT tells us the stock market does not measure an economy? GDP and unemployment were reporting a recession when the economy was actually growing and when the stock market was reporting same. GDP and unemployment numbers did not report massive productivity and economic growth until mid 1990s just as today they would not yet report a recession.
If we have moved into a recession, then GDP and unemployment will report that economic downturn many years later. Meanwhile the stock market is reporting, at best, a stagnant economy. An economy that has negative growth when inflation is included in to those numbers.
Oil price increases last year did not affect the economy? Again, this is how short term, foolish, MBA types think. They actually believe the spread sheets report what happened this year. Back in the early 1970s, a severe impact from gasoline that eventually rose to $7 per gallon (2006 dollars) did not appear for many years later – mid to late 1970s.
Years ago, the wholesale price of electricity was in the $10 to 40 per MW hour. Today, those same prices vary between $50 and $220. Even today (Saturday night) when most industries are not operating ing, the price is about $75. So you tell me where your electric bill has doubled? Why have electric rates increased seven and five times - but your electric bill has virtually no increases? Price increases take a long time – multiple years - to trickle through an economy and to appear in GDP and unemployment numbers. Those massive energy cost increases have yet to be seen by consumers. Historically, price of gasoline is only slightly above normal. Why have such massive energy price increases been 'shrugged off'? Because price increases due to energy have not yet fully arrived. But again, UT forgets how 'lagging' those economic numbers are. UT forgets why neo-classical economics fails to measure and predict what makes or breaks an economy.
Massive energy price increases will arrive and will seriously impact those economies that most guzzle wastefully. It has only been a year? Therefore no economic data (ie GDP or unemployment) has yet to measure those consequences.
We have yet to see the downturn that is coming due to George Jr ‘spend wildly tax cuts’. But again, recessions created by “Reagan proved deficits don’t matter” rationalizations take years to develop. It too will be coming. When it does, GDP and unemployment will be some of the last data to report it.