How could high stock prices be a danger to the US economy? It just can’t be so, but it is. Paradox? Not really. How could persistently rising stock prices be bad for any economy? That is not possible, because people who own stocks feel wealthy. They will spend more, consumption goes up. Firms rev up production, hire more workers, wages rise, and the virtuous cycle is established; if only this were true!
Persistently rising stock prices suck the blood out of the economy and direct financial energy into the stock market. Corporations buy their own stock with cheap borrowed money, close plants, move operations overseas and leave US cities delapidated ghost towns. Tax revenues collapse, infrastructures collapse and the US slowly turns into a third world nation. This is the dark side of persistently rising stock prices.
In rising stock oriented society, wages do not grow. In fact, the buying power of wages actually falls. Poverty, anxiety, chronic illnesses, obesity, and violence increase.
Economists, academics, decision makers, politicians sing the same ol’ song: “The US economy is resilient!”, and they point to the rising stock market. It is not!
Another component contributing to the rising stock market are persistently low interest rates, draining savers of their deserved interest income.
It would be better if the stock market was at 5000 and the economy was humming with rising wages, job growth, universal single payer health care system, affordable quality education, massive infrastructure renewal programs, quality affordable housing, etc. but this will never happen.
It will never happen as long as the rising stock market sucks the blood out of the economy, turning the country into an economic desert with areas of oases where the 2% ownership class lives with the 5% overseer class.
It will never happen as long the Federal Reserve and US Treasury’s economic policy is to support the stock market. The stock market will continue to suck the blood out of the economy until the final collapse.
No change will occur without the final collapse.