I’ve been thinking about the overall fundamental economy this past week, and I’ve come up with a conclusion. I believe that from a fundamental point of view, the American economy won’t be going anywhere in the next couple of years, even if the stock market keeps advancing. Here’s why.
First of all, in order for the economy to be growing, the average American needs to spend money on buying new stuff. Unfortunately, everyone’s feeling pretty poor right now, so no one’s in the mood to spend like there’s no tomorrow. The stock market may be up, and Americans may have recieved a little retirement portfolio boost, but people are still feeling poor. Housing prices are still down. And in today’s age, the biggest asset an average American owns is his or her house. Plus, people are still in debt after the go-go spending years of the 2002-2007. Workers’ incomes are increasing much either, because corporations nowadays are trying to squeeze employees. According to the government, inflation is at 3.1%. But that’s incorrect. Has anyone over at the government every been to Wal-Mart grocery shopping lately? Have they seen the gas prices at the pump recently? If the United States used the Tony Index for CPI, then I’d say that inflation is 7%.
All this stuff isn’t making the average American feel richer. And if the public doesn’t feel like it’s getting fat on excess money, then it’s not going to go out and buy all the wonderful stuff that’s been driving the American economy over the past 50 years.
WARNING: Even though the economy won’t get much better, but that doesn’t mean the stock market won’t increase. Look at the past two years, from March 2009 to today. The economy hasn’t improved much, but stocks have more than doubled. That’s because the Fed likes to manipulate the stock market. It makes it look like the Fed is actually “saving” the economy, when all they’re doing is helping the rich investor get even richer, while leaving the average American stressing how to pay his or her bills.