|
Where are we at today in terms of economy? Let’s look at some broad economic data. The major stock market index, Dow Jones Industrial Average, jumped from 6763 on March 3 to 7608 on March 30, an astonishing 12% surge in this bellwether section of the financial sector. Unfortunately, according to University of Michigan survey, Consumer Sentiment, the greatest barometer measuring health of the real economy, stayed at 57.3 by the end of March, statistically dead even with the February reading. Moreover, according to Labor Department, job situation in the US was still worsening in March.
Looking at the stock chart between 1928 and 1932, there was a clear upside period started several months after the great depression official began in 1929. We are now exactly in the sixth month of this recession. This might be a coincidence. However, coincidences tend to carry significances.
In article “Real Causes for US Financial Meltdown and Global Recession”, I have concluded the extreme inequality is the fundamental cause for this episode of global economic crisis and the great depression in 1929. In article “Trillions Dollars Won't Save US Economy, Data Say”, I suggested that the most urgent task of the US government ought to be stimulating the real economy. Money that flows around the financial sector will not trickle down to the real economy if consumer’s sentiment remains low. Instead, massive money injections into the banking system will inevitably further escalate inequality situation, which could potentially lead the country to a bigger crisis in the future, i.e., a depression.
Considering in healthy economic development, consumer sentiment is always a key factor impacting stock trend, what does this sharp contrast mean? It is very clear that the current rescue plans have been stimulating a bubble in the financial system and did nothing in terms of rescuing the broad economy. A large number of millionaires have been created in March alone in the financial sector. But the financial conditions of average consumers did not even see a slight improvement. What could this be other than amplifying the extreme inequalities?
We now may well be on the way to a depression, if the rescue efforts are not shifted to the real economy
immediately.
Related Series Articles on Global Economy and Recession
by Jonathan Wang
Railroad Expansion, Most Effective Way to Rescue US Economy
Consumer Sentiment Lags, Stock Markets Soar - Sign of Depression?
Trillions Dollars Won't Save US Economy, Historical Data Say Everything
Why China is more resistant to the global recession than any western
countries?
Bail Out Banks...Again? Caution, Don't Jail in Economy
What has really caused collapse of the financial market in the United
States?
|
Post a Comment 