Was yesterday’s Dow Industrial Average plunge a shot across the bow? An early warning of the beginning of the end? Or was it just a random hiccup?
Yesterday, February 5, America’s biggest industrial stock market index took an icy plunge, falling by 1,200 points, or 2.18 percent, to 23,923.88. That followed the previous business day’s trading when the index plummeted a staggering 666 points, down 2.5 percent – the worst day to hit Wall Street since the markets were shook by the Brexit referendum in June 2016.
Chuck Carlson, chief executive officer at Horizon Investment Services Indiana, said the growing interest rate could be the culprit. “People are starting to really get increasingly uncomfortable with the rapid rise in interest rates that we have seen and the uncertainty of how that is actually going to start to play out relative to competition for stocks.”
Precisely. Interest rates have been kept so low for so long, people have naturally over-invested in equities for any hope of gaining a reasonable return. Couple the artificially low interest rates with the wild increase in cash from the Fed’s “Quantitative Easing,” and the equities markets have had no place to go but up.
But bond and other debt yields have been allowed to rise recently. Analysts warn that stock market selling caused by raising bond yields may have triggered concerns for an even deeper market sell-off. Rising bond yields imply higher borrowing costs for companies and the yield on a 10-year US Treasury debt skyrocketed to a four-year high of 2.8 percent on Monday.
Naturally, all this can be very confusing to the average Joe on the street. “[T]he way the economy is described in the press and in University courses has very little to do with how the economy really works. The press and journalistic reports use a terminology made of well-crafted euphemisms to confuse understanding…” (Michael Hudson, J is for Junk Economics, A Guide to Reality in an Age of Deception). With grossly “misleading vocabulary, the Orwellian double-think used by the media, bank lobbyists and corporate lobbyists to persuade people that austerity and running into debt is the key to wealth, not its antithesis. The aim is to make them act against their own interests, by drawing a fictitious picture of the economy as if it’s a parallel universe.
If you can make people use a vocabulary and concepts that make it appear that when the 1% gets richer, the whole economy is getting richer – or when GDP goes up, everybody is improving – then the people, the 95% who did not improve their position from 2008 to 2016 somehow can be made to suffer from the Stockholm syndrome.”
The aim is to make them act against their own interests, by drawing a fictitious picture of the economy as if it’s a parallel universe.
The market has been soaring while the average person continues to eke out a living in a declining economy. By manipulating not only the money supply and interest rates, but the very vocabulary we use to discuss and understand these matters, the people not in the one percent are left to think, “What’s wrong with me? Why am I falling behind?” But the truth is, “Productivity, business investment, personal consumption, inflation and growth have all been either sputtering-along at half speed or at historic lows for the entire period… The whole storyline is completely fake. The economy was being rejiggered in a way that deliberately kept growth weak (by withholding fiscal stimulus) in order reduce upward pressure on wages that would have pushed inflation higher forcing the Fed to raise rates. That may sound complicated, but it’s actually a very simple and straightforward way to keep inflation at bay.
“The U.S. ended 2016 on a familiar trajectory of roughly 2% economic growth, the lackluster trend that has prevailed through most of the current expansion… Gross domestic product, a broad measure of the goods and services produced across the economy, expanded at an inflation and seasonally adjusted annual rate of 1.9% in the fourth quarter…… That has made this the slowest expansion since World War II.” (Economy Returns to Lackluster Growth, Wall Street Journal)
Is There Any Good News?
There is still good news. No, really.
Yes, the top 1% keep taking a larger percentage of the world’s income. But That’s not the entire story. The One Percenters seem to have a pretty firm grip on their power and positions, but you don’t have to be in that category to have a very good life. The fact is, the population in the upper income echelons is fluid. People move in and out fairly regularly. Honestly, you and I may never get to be in the 1%, but the top ten percent or even the top twenty percent wouldn’t be bad.
I grew up in a family without much money. In my teen years I only wanted to be a musician and I figured I’d continue to be poor throughout my life. Then, in one fell swoop, I graduated from college with a degree in music and realized I just wasn’t talented enough to make any kind of living as an artist and I had plans to get married.
Now what do I do? Going back to school to get a business degree seemed to be the sensible option. I eventually earned an MBA and tried the corporate route. I tried the real estate route. I tried the MLM route. I tried the import business route. Not only wasn’t I talented enough in music to earn a living, I didn’t seem to be smart enough in business to make that work either.
That was a long time ago in a galaxy far, far away. The world has changed—the internet has presented a whole new universe of possibilities for anyone willing to spend a little time and energy to learn and take hold of new information and technologies, to be creative, to pursue new options.
I found Michael Cheney’s training and products and embarked on a whole new life. He can explain much better than I can, so the best thing I can do for you is give you a link to a starting point. If you’re tired of the nine-to-five world and watching the real rate of inflation eat away at your future, I highly recommend you check this out.