Michael Panzner writes about the divergence between wage expectations and stock market performance in the article below. This divergence cannot continue forever. One of his two charts is going to change direction to become more like the other. Which one will that be?
Based on yesterdays stock market performance, an early answer seems to be that the stock market will turn down. That would be a rational response. After all, the stock market is nothing more than an imperfect proxy for economic activity. Ben Bernanke can “pump” stocks for a while, but ultimately they must be supported not by money and credit but real underlying economic fundamentals. Those obviously are missing so we wait to see whether Ben’s market sham can last until a real economic recovery begins.
My bet is that the stock market cannot hold out. That bet is supported by my belief that we are in the early stages of the Greatest Depression the world has ever seen and have been since the feces hit the blower in 2008. We never came out of recession! We are merely in the early phases of a Great Depression. Link to Panzer’s article
An article at the Cleveland Federal Reserve Bank’s website, “Wages, Expectations, and Prospects for Inflation” (hat tip The Atlantic), includes a compelling graphic, “Expected Change in Family Income.” It charts the median answer to a question, “By about what percent do you expect your (family) income to increase during the next 12 months?” asked each month by the University of Michigan in its Survey of Consumers.
Although it doesn’t seem to be the author’s intention, the image of a relentless slide over the course of the past three decades serves as a depressing reminder of what the U.S. has become: a country where ordinary Americans are finding it harder and harder to get by, and where they and their loved one are forced to keep downgrading their expectations about the future.
Maybe it’s all in my head, but it struck me how much at odds this image of where things stand in today’s America is with another one that Washington and Wall Street like to harp on about:
Some might say this is simply more evidence that America’s days as the leader of the free world are numbered. Agree?
Three Charts That Bust the Inflation Myths (Wall Street Daily, 5/20/11)
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