Dow 12,000? Yawn...
The business and mainstream press are breaking out the party hats with the Dow going over 12,000. It's a nice number and milestone to report on, I just don't think it has that much merit as an accurate measurement of the health of the US economy.
As I said in a previous post, there's a difference between the financial economy and the 'real' economy. The financial economy in the US is based on increasing asset values in stocks, mutual funds and real estate. As folks found out from the dot-com crash, just because a stock has a high price doesn't mean it has high value.
The 'real' economy is based on honest-to-Pete business profits, savings and investment. Unfortunately, most Americans look at the financial and not the real economy as the barometer of our country's financial health. If you think of the US economy as a company and look at our financial statements, they don't look very healthy at all.
Peter Schiff talks about 'getting real' on deficits, and a recent Federal Reserve report by Lawrence Kotlikoff asks the question: Is The United States Bankrupt? Because the US Dollar has been the world's reserve currency for most international transactions, we've gotten away with this excessive borrowing and spending at the household, corporate and government levels.
Unless my economic history is wrong, I've never seen any country or company borrow and spend their way to prosperity. I realize the economy is chugging along pretty well now, but I'm bracing for the day when the US has to pay the pipers who have financed our paper prosperity.
As I said in a previous post, there's a difference between the financial economy and the 'real' economy. The financial economy in the US is based on increasing asset values in stocks, mutual funds and real estate. As folks found out from the dot-com crash, just because a stock has a high price doesn't mean it has high value.
The 'real' economy is based on honest-to-Pete business profits, savings and investment. Unfortunately, most Americans look at the financial and not the real economy as the barometer of our country's financial health. If you think of the US economy as a company and look at our financial statements, they don't look very healthy at all.
Peter Schiff talks about 'getting real' on deficits, and a recent Federal Reserve report by Lawrence Kotlikoff asks the question: Is The United States Bankrupt? Because the US Dollar has been the world's reserve currency for most international transactions, we've gotten away with this excessive borrowing and spending at the household, corporate and government levels.
Unless my economic history is wrong, I've never seen any country or company borrow and spend their way to prosperity. I realize the economy is chugging along pretty well now, but I'm bracing for the day when the US has to pay the pipers who have financed our paper prosperity.
posted by Brian Ochsner | 10:27 AM
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