A few weeks ago I did a post, which I titled 'Party Like It's 1999.' In that post, I made the observation that the Dow was at the same levels it was in 1999 and in the last twelve years it's overall gain has been nothing. What I failed to mention is why this should not be happening.
Since 1999 we have have experienced significant inflation. As inflation rises the Dow Jones is supposed to rise with it. As inflation rises, so should the dollar value of the market, even if the actual value does not. That is not happening. At the rate we have inflated the currency since the financial crises, the Dow should be well above 16,000, but it's struggling to stay above 10,000.
How is this happening? The backbone of the economy (small business) has been regulated and taxed to it's deathbed. Actually, most of what small business has lost has either been transfused to the non-producing public sector, or, transferred to multinational corporations which have outsourced the wealth.
To put it simple, jobs plans and stimulus packages are not going to make any difference. Our economic problems are complex and varied, but at the heart of it all, we have an outsourcing problem. Globalization is doing to us what it has done to nations like Indonesia and Iceland. Will we become a vassal state as did Indonesia or stand up to them as did Iceland?
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