The economy is improving but it may not seem that way. The reason is simple enough. Even though more people are working, the incomes of many people have not substantially increased. Employment statistics don't matter to those who are working long hours but realizing stagnant wages and incomes.
Financial markets are doing well, with the S&P within 1 percent of its all-time high as of this writing. Even though many people own stocks through their retirement funds, roughly 80 percent of American stocks are owned by the wealthiest 10 percent of the people.
There is much speculation over current levels of the major market indices. Can these levels be maintained? Are we due for a crash? What will happen when the Fed raises interest rates? And when will this occur?
Money managers and the financial press listen with baited breath to Fed Chair Janet Yellen, grasping for a clue to answers. All this while critics, especially Republican politicians, complain of the "Fed's secrecy" and rail about the "irresponsible" expansion of the nation's money supply.
Allegations of the "Fed's secrecy" are ridiculous, as Ms. Yellen has been far more open than the deliberately opaque nonsense dished out by a previous chair, Alan Greenspan, who was idolized by these same Republican critics. Nobody can predict the future. But Ms. Yellen has been clear that the Fed has no intention of raising interest rates until the economy is clearly on a sustainable path to recovery. Based on her performance thus far, we can be sure that she will advocate nothing rash.
And surely, it's hard to imagine any competent policy analyst suggesting that we should have had a contractionary monetary policy with high interest rates during recession and recovery.
This may sound mundane, and even boring, but that doesn't stop the peddlers of financial newsletters from whipping up imaginary crises and the excitement - and fear - that go with it.
Their tactic is to tap into situations that we can identify with. But first, they have to grab your attention. A recent ad for a newsletter that crossed my desk screams, "Bloody Wednesday - Sept. 16, 2015 - behind closed doors in Washington, D.C. ... an event will take place that will change everything in your life." The newsletter goes on to tell you what you must do - before Sept. 1 - to "protect and preserve your wealth" - namely, subscribe to that newsletter to lead you through the financial wilderness.
The "Bloody Wednesday" referred to is presumably the September meeting of the Fed's Board of Governors and a possible - maybe likely - incremental raise in short-term interest rates that should shock no one. The Fed has been candid about the need to eventually raise rates. It may be too much to assume, but one would expect managers of large portfolios to have positioned them to account for such action. But it's more dramatic to pitch such modest, and foreseen, action as "Bloody Wednesday."
Another recent newsletter begins by screaming, "The terrifying truth that the media doesn't want you to know ..." and "What you must do immediately to insulate your family and your money from Washington's scheme to break you."
Washington wants to break you? Who, in Washington? Of course it's "Obama and his cronies," who are "planning to use your money to save their own hides."
Hey, come on - the president is a lame duck, more concerned with his legacy than with "grabbing your money." It's in his interest to see incomes rise. Okay, a lot of people, including some readers of this column, don't agree with his policies, don't like him for whatever reason, and blame him for slow recovery. But he inherited a heckuva mess and, in my opinion, did what he could in light of bitter resistance by his opponents who openly promised the day after his election that their objective was to "make him fail."
Having grabbed the reader's attention with the president's alleged scheme to "grab your money," it then moves to a couple of real problems addressed as "mortal wounds." One is the high cost of the "war on terror" following 9/11. Sure, many of us believe that it was some combination of misguided, ineffective, and even counter-productive - and surely costly. It lists a second "mortal wound" as the irresponsibility of Wall Street and corporate fraud that dealt a devastating blow to the American economy. Okay, fair enough.
But from there, he goes off the deep end, alleging that another "mortal wound" is "Obamacare," that is "the final nail in the coffin for a middle class that's been systematically destroyed by the Obama Administration."
That's red meat for Republicans all right. But labeling legislation to make health care affordable and available to millions of Americans as a "mortal wound" equivalent to 9/11 and the Great Recession? And blaming decline of the middle class on the current president, when it has been occurring for several decades?
But the purpose of that drivel is not rational policy analysis, it's to sell newsletters. If the above isn't wild enough, read on. He forecasts doom, including collapse of the U.S. dollar, skyrocketing prices of gold and silver, and collapse of the European Union. So why would anyone want subscribe to that newsletter and even get into stocks?
Never mind the forthcoming doom; not yet, anyway. He assures us that the "bull market of a lifetime is only just beginning," and "The Dow will explode to 31,000 by 2017." The dollar will "rise before it enters its final death throes."
Who knows? But according to this charlatan, there is still time to subscribe to his newsletter and profit from temporary prosperity, prior to doom and final collapse brought about by all these "mortal wounds."
Students can learn nothing about economics or public policy from the gibberish of these financial newsletters. Nevertheless, there is a practical classroom use - namely exercises in logic and critical thinking.
- John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Fridays in The Monroe Times.
Financial markets are doing well, with the S&P within 1 percent of its all-time high as of this writing. Even though many people own stocks through their retirement funds, roughly 80 percent of American stocks are owned by the wealthiest 10 percent of the people.
There is much speculation over current levels of the major market indices. Can these levels be maintained? Are we due for a crash? What will happen when the Fed raises interest rates? And when will this occur?
Money managers and the financial press listen with baited breath to Fed Chair Janet Yellen, grasping for a clue to answers. All this while critics, especially Republican politicians, complain of the "Fed's secrecy" and rail about the "irresponsible" expansion of the nation's money supply.
Allegations of the "Fed's secrecy" are ridiculous, as Ms. Yellen has been far more open than the deliberately opaque nonsense dished out by a previous chair, Alan Greenspan, who was idolized by these same Republican critics. Nobody can predict the future. But Ms. Yellen has been clear that the Fed has no intention of raising interest rates until the economy is clearly on a sustainable path to recovery. Based on her performance thus far, we can be sure that she will advocate nothing rash.
And surely, it's hard to imagine any competent policy analyst suggesting that we should have had a contractionary monetary policy with high interest rates during recession and recovery.
This may sound mundane, and even boring, but that doesn't stop the peddlers of financial newsletters from whipping up imaginary crises and the excitement - and fear - that go with it.
Their tactic is to tap into situations that we can identify with. But first, they have to grab your attention. A recent ad for a newsletter that crossed my desk screams, "Bloody Wednesday - Sept. 16, 2015 - behind closed doors in Washington, D.C. ... an event will take place that will change everything in your life." The newsletter goes on to tell you what you must do - before Sept. 1 - to "protect and preserve your wealth" - namely, subscribe to that newsletter to lead you through the financial wilderness.
The "Bloody Wednesday" referred to is presumably the September meeting of the Fed's Board of Governors and a possible - maybe likely - incremental raise in short-term interest rates that should shock no one. The Fed has been candid about the need to eventually raise rates. It may be too much to assume, but one would expect managers of large portfolios to have positioned them to account for such action. But it's more dramatic to pitch such modest, and foreseen, action as "Bloody Wednesday."
Another recent newsletter begins by screaming, "The terrifying truth that the media doesn't want you to know ..." and "What you must do immediately to insulate your family and your money from Washington's scheme to break you."
Washington wants to break you? Who, in Washington? Of course it's "Obama and his cronies," who are "planning to use your money to save their own hides."
Hey, come on - the president is a lame duck, more concerned with his legacy than with "grabbing your money." It's in his interest to see incomes rise. Okay, a lot of people, including some readers of this column, don't agree with his policies, don't like him for whatever reason, and blame him for slow recovery. But he inherited a heckuva mess and, in my opinion, did what he could in light of bitter resistance by his opponents who openly promised the day after his election that their objective was to "make him fail."
Having grabbed the reader's attention with the president's alleged scheme to "grab your money," it then moves to a couple of real problems addressed as "mortal wounds." One is the high cost of the "war on terror" following 9/11. Sure, many of us believe that it was some combination of misguided, ineffective, and even counter-productive - and surely costly. It lists a second "mortal wound" as the irresponsibility of Wall Street and corporate fraud that dealt a devastating blow to the American economy. Okay, fair enough.
But from there, he goes off the deep end, alleging that another "mortal wound" is "Obamacare," that is "the final nail in the coffin for a middle class that's been systematically destroyed by the Obama Administration."
That's red meat for Republicans all right. But labeling legislation to make health care affordable and available to millions of Americans as a "mortal wound" equivalent to 9/11 and the Great Recession? And blaming decline of the middle class on the current president, when it has been occurring for several decades?
But the purpose of that drivel is not rational policy analysis, it's to sell newsletters. If the above isn't wild enough, read on. He forecasts doom, including collapse of the U.S. dollar, skyrocketing prices of gold and silver, and collapse of the European Union. So why would anyone want subscribe to that newsletter and even get into stocks?
Never mind the forthcoming doom; not yet, anyway. He assures us that the "bull market of a lifetime is only just beginning," and "The Dow will explode to 31,000 by 2017." The dollar will "rise before it enters its final death throes."
Who knows? But according to this charlatan, there is still time to subscribe to his newsletter and profit from temporary prosperity, prior to doom and final collapse brought about by all these "mortal wounds."
Students can learn nothing about economics or public policy from the gibberish of these financial newsletters. Nevertheless, there is a practical classroom use - namely exercises in logic and critical thinking.
- John Waelti of Monroe, a retired professor of economics, can be reached at jjwaelti1@tds.net. His column appears Fridays in The Monroe Times.
