Economists, A question

[Renew Deal]

Have a look at this and the posts that follow.

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=923873&mesg_id=924344&page=

Why is TrogL freaking out? Is it justified? What does this really mean?

I have heard that there are real hard times coming, but I'm not sure if this is it.

[Nite Owl]

1. We have been long overdue for a

correction. The market manipulators never really let it happen so this could be it. There is talk of too much foreign ownership in the American markets, foreigners own half of our debt and if they bail we are indeed in trouble but it would be trouble for everyone else if America fails as economies are so intertwined. Personally I think, I hope, that Wall St now has come to realize that this administration is on their way out. It isn't so much that they are partisan as now they face an unknown entity in Kerry therefore they sell. Some inportant levels have been broken so the nest stop for the Dow appears to be at about 9600. If that doesn't hold watch out below could go to mid 7000's. Watch the financials for clues. The Spitzer insurance case has legs, could bring down some biggies.

[On the Road]

2. We Don't Know If There's a Crash Coming

There are always contrary economic indicators, and many negative trends either have an upside or will eventually reverse themselves. The rise in stocks in the 90's led to the bear market since then. Low interest rates have led to higher real estate prices, which increase many people's wealth, but also make houses overpriced and unaffordable. A strong dollar makes imports cheap, but hurts exports.

But there are definitely things to worry about.

TrogL's post had to do with the sinking value of the dollar. The weak dollar is a Bush policy designed to improve the trade balance. It may also reflect foreign investors' pessimistic view economic prospects.

A weak dollar can ignite inflation to the extent it raises the price of imports. A bigger danger would be a run on the dollar which could trigger an economic crash like happened in the last ten years in Mexico, South Korea, Argentina, Indonesia, and other places. The US has usually been protected from this because our economy is so big and the dollar is so widely used for international exchange. But that's changing. It's still a long shot, but if the national debt continues to pile it's more and more possible.

[phantom power]

3. consider a couple numbers....

When Clinton took office, the Dow was at about 3400, according to this graph:

http://www.indicant.net/Non-Members/Tours/MTIRYS-Mkts-US/MTIRYS-01-DJI-1992-1996.htm

Even if the Dow had been at "only" 7000 at the end of Clinton's terms, that would have represented very healthy growth: doubling in just 8 years!

That suggests a pretty substantial over-valuation, which has not yet been corrected.

[kleptocrat]

4. What does it say? not availabe

Can you access the post? I got an error message that said archive info not available unitl after the election.