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Economic Review

9/27/2010

The latest Bubble stimulus strategy… just another factor that is driving wealth divisions in the US economy.

The latest policy to jump start economic growth or to help avoid a double dip recession (whichever way you look at it) which has focused on driving Equity prices higher, may not be resulting in the stimulus to the most important part of the economy. 

As we mentioned last week, since the tactic of “doing whatever it takes” to spur economic growth policy was alluded to back in late August, US Stock indexes have now posted roughly 10% gains in about one months’ time. These gains are in light of little to no fundamental supportive economic factors but more the idea of increasing Stock prices and capital gains to increase wealth of shareholders.

The reality of this latest exuberant bubble up in Stocks however, is that a significant number of less wealthy consumers (a percentage of the US economy which is growing dramatically), is not participating in this unfounded stimulus ploy.  Volume in stock trading as been anemic and the main culprit behind this is a fear of smaller investors of losing significant sums of retirement funds to flash crashes and the like.  In other words, the average Joe is beginning to see the non-sense in Stock moves and would rather earn next to nothing in bank accounts than jump into a risky scenario which could result in quick and significant losses to wealth.

The individuals who are cashing in on this recent bubble price move in stocks are the elite wealthy who are compensated in Equity shares and options on shares and who have the risk toleration for being able to absorb massive swings in the markets.  More specifically, CEOs of organizations that are destroying US jobs by outsourcing them to low wage nations should be doing particularly well in this environment. 

So average guy…what can you do?  November is a start.

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