Might average people think that a climbing Dow Jones average actually can be bad news?

I understand that around 50% of the population has no connection to the stock market. I assume that the majority that is involved with stocks has an indirect interest through mutual funds, retirement accounts, etc. I understand that fees over time extract tremendous value from the holder. I believe that Dr. Wolff has stated that 75% of all stocks are owned by 1% of stockholders. If the stock prices are going up, my guess it is usually not because companies are making new products such as a new I-phone, but rather through buy outs, reducing labor costs, lay offs, cheating on environmental laws, not paying taxes, speculation, etc. Then to add insult to injury, dividends and profit on selling stock are generally taxed at lower rates than earning from labor.

Official response from submitted

Your list is excellent. Stock prices reflect supplies and demands for stocks and those supplies and demands can be and are affected by many, many variables. In recent years, for example, mergers and stock buybacks (when companies buy their own stocks and so retire them from circulation) have sharply reduced shares available for buyers with resulting price increases. Likewise massive injection of new money into the US economy by the FED since 2008 has boosted demands. Foreigners, frightened by deteriorating conditions for global capitalism, move their money into US stock markets so long as that seems safe. Such moves can and do raise stock prices (and thus the Dow industrial average) even though they have little or nothing to do with production, growth, efficiency or anything else about the production of goods and services.


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  • Richard Wolff
    responded with submitted 2017-02-09 15:28:15 -0500
  • Don Palmerino
    published this page in Ask Prof. Wolff 2017-02-08 20:02:24 -0500

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