Another Boom Gone Bust
While the United States economy continues to flounder the stock market on the other hand has certainly been good to investors this past year and just maybe a little too good. There are already warning signs of trouble ahead. It seems like deja vu all over again with yet again continued over extension and over-valuation. Then there is an acceleration of buying securities with money you don't have or, more precisely, with borrowed money from your broker, with your investments as collateral. This buying on margin has only escalated in recent months as the market continued to soar to record levels of late. Now more speculative investors are clamoring to join the band wagon. Another danger hiding under all this margin speculation looms ahead. Sounding familiar, it should. As stocks appreciate brokers and investors borrow even more. This market boom which has expanded investors portfolios but the looming danger lies in the enormous debt that has resulted.
What has resulted when any time there is a stock market surge as the levels we have seen in recent weeks there is also corresponding amounts in margin loans. The amount now owed on loans secured by investments has reach record levels at over $390 billion. If history is any indication this record level of debt is so much greater than the amount owed prior to 2008. As we remember that financial meltdown sent the worlds economies into a tailspin of economic depravation from which we are still recovering. And, now another repeat of financial calamity headed are way right when millions of Americas are still reeling from the last financial fiasco will send the economy even further back.
What is happening in Europe where their markets fell to six week lows indicated that trouble in our markets is already here. In Greece they are still not out of the woods yet. There unemployment rates are among the highest in Europe. With much of Europe still in a economic what many are calling a depression it is also affecting the United States economy as well. This, contrary to what has been happening on Wall Street.
There are tell tale signs regardless of what Wall Street has done that the economy is very much in jeopardy and our future remains pretty bleak for the majority of Americans. What the government did with those bailouts only increased the stock market feeding frenzy, like Pariahs devouring their prey while the majority of Americans have only languished in a perpetual state of economic retardation.
It should be noted that when the government flooded the financial and auto industries in 2009 with billions of borrowed money what ensued was that major corporate profits have hit another all time high. Today, companies are making more money than in any other time in history. Yet these corporate heads of economic and financial wizardly are complaining that they are suffering from too much regulation and too many taxes. It is the small business owners, you know the ones that really are the engines of economic growth, that are suffering from too much regulation and too many taxes. But, what these big corporate conglomerates are actually suffering from is myopic obsession with short term profits at the expense of long-term value expansion.
All across the board wages for everyday workers have hit yet, another all-time low. One of the biggest reasons why corporate profits, CEO's salaries and share holders returns have skyrocketed is that companies are paying employees less than they ever have. and, this in turn is another big reason why the US economy probably will continue to weaken. It is these meager wages that represent the spending power for consumers. We have to remember that that spending power in turn fuels more business expansion and actually for the long term more profits. What these so called business guru's in corporate America are actually doing with their profit fixation is actually starving the United States economy.
Another contentious issue concerning the lack of economic recovery is that ever since the early 1990's when NAFTA was enacted more Americans have been hitting the unemployment ranks than in any time in our history. As a result the employment to population ratio has collapsed. When there are so few people working with so little disposable incomes it is no wonder why the United States economy is in real trouble. The key to long term economic growth is for the majority of a population being able to fulfill the "Williams Theory Of Economic Evolution. What is actually happening today with our current obsessed-with-profits philosophy in corporate America is creating a country of a few so-called overlords and over 350 million serfs.
Is this the future we want for the next generation and generations to come? We had better take heed and realize that today's corporate attitudes, Wall Street, and current government policies have actually undermined the future economic stability of the United States and the rest of the world. The hand writing is already on the wall. Unless concrete changes in our corporate structure and a complete reform of government are undertaken we will see a country literally self destruct.