What Do We Mean
When We Talk About the Economy?
The volatility of stock markets around the world in the past week have raised questions about the strength of the U.S. Economy, which has led those around the world. Let’s look at some basics.
In the U.S., the primary markets are the New York Stock Exchange, Dow Jones, Standard & Poor’s, and NASDAQ. Then there are the bond markets that include corporate and municipal bonds and the U.S. Treasury. The effects of the stock markets are primarily psychological and impact consumer spending. The markets have been overvalued, and many had predicted a market correction.
Our economy involves a lot more than the stock markets. GDP (Gross Domestic Productivity) measures the production of goods and services. With the offshoring of a large portion of U.S. industrial production over decades with the expansion of the global economy, GDP is based primarily on services. That includes a broad range from McDonald’s to private venture capitalists.
Most economists at this point seem to think that our economy is secure. Although the job market is finally starting to cool, the inflation rate also has dropped. Some of them think the Feds (Federal Reserve) have been too slow to drop interest rates. During the Depression of the 30’s, the Feds were given the role of controlling the flow of money. One of their tools is to adjust interest rates.
Of course, the state of the economy is a major factor in the election campaigns. Working class people have seen a slight increase in wages in recent years after 40 years of stagnation. It still takes two people working to maintain a minimum standard of living in most cases. Higher wages in the tech industry have dropped off as the industry for the first time in recent years has seen a decline. The most recent job numbers show a decline in new jobs and a rise in unemployment claims. These numbers are vague and usually are adjusted seasonally.
In the background is the fact that we have a vast inequality of wealth, where a handful of billionaires are worth more than 95 percent of the rest of the population in the U.S. They suck more money out of the economy than they put into it. They can spend millions of dollars in unlimited campaign donations thanks to a U.S. Supreme Court decision a decade ago that allowed that. Those donations have a significant impact on elections.
One of the structural changes in the economy is the recent legislation providing funds to repair and replenish the public services and functions of government that have failed to function efficiently over 40 years. They also had a long-term effect on the economy. The number of new projects currently underway are still too small to have much an effect.
Economists are experts in documenting and analyzing data and guessing at the causes, but they fail at predicting the future. The economy is changing too fast, and the data are not an accurate indication of what may occur. The impact of AI (Artificial Intelligence) is projected to have a major impact, even outside the tech markets. The technology is still too new and in development to accurately judge that impact.
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