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Pundits, especially financial channel Pundits, love to rave about our record-setting economy.

Pundits, especially progressive leaning political Pundits, love to rave about our economy's widening Income disparity.

The glaringly obvious fact that few in Punditry-land have yet to fully realize:

That success on Wall Street does NOT equal success on Main Street.
Even from a purely mathematical perspective, the stellar growth in one market still remains majorly disconnected from the lackluster growth in the other.

Continuing to assume that these two markets are (still) somehow directly connected, may ultimately turn out to be fundamentally and fatally flawed.


For an off-the-cuff chart illustrating this stark divergence between Wall Street and Main Street growth, just continue reading the rest of this post.


First the Wall Street success story, boiled down to a single number:


Wall Street vs. Main Street, and Guess Who Wins

by Jeff Cox, Finance Editor, cnbc.com -- 8 May 2013

One major legacy of Wall Street's four-year rally will be that it came while the economy and Main Street lagged.

For that reason, two market experts at this week's SkyBridge Alternatives conference in Las Vegas said, the bull run has to be viewed with somewhat jaded eyes.
[...]

The stock market has surged about 140 percent since the March 2009 lows, but the economy has struggled.

Unemployment is still 7.5 percent, and gross domestic product grew just 2.5 percent in the first quarter. [...]

Note: that 140% return is probably even larger now, given the ongoing stock market rallies throughout 2013. I'll stick with the 140% growth number though because it still makes the point.


Next the equivalent Main Street 'success' story, which is often boiled down to growth of the Gross Domestic Product (GDP -- a summary of US Product & Services produced, excluding those for the Military):

GDP growth (annual %)

data.worldbank.org

                     2009    2010    2011    2012
United States     -2.8     2.5     1.8     2.8    

OK now we need the projected US GDP for 2013 ...


US economy grows 4.1 percent in third quarter: Stage set for a better 2014?

by Mark Trumbull, Staff writer, csmonitor.com -- Dec 20, 2013

[...]
But in a recent survey, business forecasters said they expect America's economy to grow 2.8 percent next year, adjusted for inflation. That compares with their estimate that 2013 will clock in with 2.1 percent growth for the calendar year.
[...]
2013            Total Annual GDP Growth      (with Growth compounded year over year)
                          since 2009                              (rough approximation)
  2.1  estimated       6.4%                                        (14.8%)


OK, so who is 'winning out' in this Battle of the American Streets?

Here a handy chart that shows where the lion's share of "our" economic growth has been going:


Sooner or later Americans will have to admit the stark Reality, (non-stock owner Americans anyways) that:

Success on Wall Street DOES NOT equate to success on Main Street.

(Despite what we may have always been told.)


And for the sakes of both those Economies, sooner would be better ...



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Comment Preferences

  •  Wall Street seems to make money... (6+ / 0-)

    ...by moving it around. Main Street makes money by making and/or selling things. Which do you think directly impacts the 99%?

    Float like a manhole cover, sting like a sash weight! Clean Coal Is A Clinker!

    by JeffW on Fri Dec 27, 2013 at 04:55:50 PM PST

  •  when the President is made aware of this... (4+ / 0-)
    Recommended by:
    jamess, Killer of Sacred Cows, AoT, Burned

    I'm sure he'll make some changes in his economic strategy.

    Dear NSA: I am only joking.

    by Shahryar on Fri Dec 27, 2013 at 04:59:43 PM PST

    •  ahh (2+ / 0-)
      Recommended by:
      Killer of Sacred Cows, AoT

      the Fed is an independent agency.

      They tend to have the most impact on these rates.

      •  The Fed has reduced rates to what might properly (0+ / 0-)

        be considered a processing fee to keep track of how many dollars it sends out. While the spread between the "cost" of the dollars and what the Treasury pays to borrow them back is still more than two percent, our domestic investors are not content because they still have bonds on which the Treasury paid eight percent when they were issued. They want their "investments" to be both risk free and doubling automatically. At seven percent, a pot of money doubles every ten years. So, it's obviously possible to live off the interest.
        Regardless of what the Fed charges for the dollars it doles out, the banksters are still guaranteed a first cut. That's what the Congress set up a hundred years ago. The rationale was that Congress could not be trusted to manage the currency, so that function was handed over to the private sector. The reality is that Congress has proved trustworthy in consistently distributing dollars so as to insure their own incumbency.
        Now that this looks to be in jeopardy they are, like the unjust steward in the bible, squandering the remains to secure a soft landing for themselves. The House has seen 212 freshmen as a result of the last three elections. The remaining old timers have seen the writing on the wall.
        Where the Tea Party people go wrong is in thinking they've been taxed too much by Washington. The real problem is that in refusing to keep the dollars recycling at a good pace, Congress has produced stagnation, stinting the states and forcing them to borrow from the banks. Which is why the states turning down dollars for Medicaid is such a stupid response. Medicaid is not an unfunded mandate, even if the funding is proposed to shrink ten percent in three years.
        Though, there is reason to fear Congress won't keep that commitment, either. But, once a right has been granted, it is much harder to take back, especially if there is a material value attached.

        Obamacare at your fingertips: 1-800-318-2596; TTY: 1-855-889-4325

        by hannah on Sat Dec 28, 2013 at 01:46:32 AM PST

        [ Parent ]

    •  Your sig is too perfect for this comment n/t (1+ / 0-)
      Recommended by:
      Shahryar

      If knowledge is power and power corrupts, does that mean that knowledge corrupts?

      by AoT on Fri Dec 27, 2013 at 07:37:21 PM PST

      [ Parent ]

    •  The President makes no economic decisions. (1+ / 0-)
      Recommended by:
      BusyinCA

      His job is to spend the dollars Congress gives him. He's in the same position and wives who had to ask husbands for grocery money used to be. That uncertain income stream is what prompted many a female to go work for someone else and another "tradition" went belly up.

      Obamacare at your fingertips: 1-800-318-2596; TTY: 1-855-889-4325

      by hannah on Sat Dec 28, 2013 at 01:21:10 AM PST

      [ Parent ]

      •  That's a myth ... (0+ / 0-)

        Here are some economic decisions that were made by President Obama.

        1. He kept Bernanke in place and has now nominated Yellen to replace him.
        2. The President pushed for TARP. I know lots of people forgot already, but the economy could have gone in the tank, if it wasn't for the Stimulus. The President is being blamed today for the massive debt, but people seem to forget where we were in 2009 and the decisions the President had to take to keep us out of a massive recession.
        3. The President pushed and got the Bush Tax Cuts to expire, at least some of it. Republicans and the 1% argued that it would take jobs away ... guess what? The economy has never been stronger.
        4. The President bailed out the Auto Industry, which saved plenty of Jobs and prevented a much deeper recession. Romney would have let Detroit go bankrupt.
        5. The President pushed and supported decisions to help the under water mortgages and foreclosures. House prices have stabilized. I refinanced my mortgage and am paying 20% less per month because of low interest rates.
        6. The President ended the Iraq war, which freed plenty of $$$ to invest in America.
        7. Student loans are no longer handled by Banks, but at the Tresaury, which has helped save billions, which can be pumped into the economy.
        8. And I can go on and on and on ...

        I know, all these things are only "4" years old and some of us might have already forgotten, because we are looking for things to blame on this President.
        But as you can see with very recent examples, the President policies and decisions do have a real factual influence on the Economy. That's why the 2008 recession belongs to Bush and the recovery belongs to Obama. And don't forget the Clinton Recovery and expansion a budget surpluses versus the Reagan trickle down and the "Deficits don't matter" sentences from Cheney.

        •  Well, deficits do matter, but not in the way (0+ / 0-)

          either Congress or the President claim. The "deficits" represent excess dollars that investors have lent back to the Treasury, instead of returning them as revenue. But, all of that is determined by legislative directives that come from Congress. Congress has been good at perpetrating the myth that the executive is in charge of the economy so they can play favorites and secure their own fortunes.
          The transfer of student lending to the Department of Education was a Congressional achievement as part of the PPACA. The President signed the laws, but he didn't propose them or write them.
          The strategy to do health care before bank reform may have come from the executive and I happen to think it was smart, but Obama was roundly criticised for letting insurance reform jeopardize dealing with the banks.
          But, by definition, policy is a legislative prerogative. The executive's function is to carry it out.
          I will grant that Obama terminated the Iraq involvement. But then, foreign affairs, including making war, are the CinC's prerogative, much as Congress likes playing with the soldiers and weapons and bombs.

          Obamacare at your fingertips: 1-800-318-2596; TTY: 1-855-889-4325

          by hannah on Sat Dec 28, 2013 at 10:23:34 AM PST

          [ Parent ]

          •  Romney/McCain would have done the same? (0+ / 0-)

            So, you think Romney and Ryan or McCain and Palin would have signed the same laws? You really believe that? You really want to diminish the role of the President in getting the country out of the massive recession or 2008/2009?

            Do you remember what Obama said during the 2008 campaign about Student loan? I hope you do. If you don't, I suggest you Google it.

            What's shocking to me is the short sighted nature of your arguments. If you replace Obama with either Romney or McCain ... You probably believe they would have taken the same steps to stabilize the economy, right? Please go read how Romney/McCain would have handled the recession: More Massive tax cuts, more wars, let Detroit go bankrupt, ... etc.

            Seriously, I really hope you are just joking.

            Obama was handed a poison pill when he took office in 2009. The biggest economic crises since the great depression.
            I can understand that right wing talking heads forget those facts. But I'm shocked that Liberals/Progressives forget the role played by the President to stop America and the world to going into a deeper recession. And he did all this, with an opposition that was determined to make him a one term President. And please don't tell me we had the majority in the Senate. Democrats/Independents had 2 months in the Senate.
            Insight is always 20/20, right? ...

            You have got to be kidding me ...  

            •  What was truly significant was the (0+ / 0-)

              Congressional election of 2006 and the Congressional election of 2008. If you'll recall, we had a Democratic majority in the House. We had a Democratic majority that set the stage for the withdrawal from Iraq. Hillary Clinton did not get the nomination because she refused to recognize that her support for the Iraq invasion was a mistake. She couldn't recognize it as a mistake because, in fact, all the preparations for the invasion and the designation of 14 long-term bases had been undertaken by the Pentagon under Clinton/Gore. It was, after all, the no-fly zone that had been enforced under Clinton which softened up Iraq's defenses, so they were essentially ineffective when the invasion actually began -- an invasion that was consistent with the Congressional AUMF and approved by all but one Congresswoman.

              Preconceived notions are really hard to shake. The belief in a leader/commander/savior/ is particularly difficult to give up.

              The economic recession started long before 2008 and is still going on. The collapse of 2008 was engineered as an October surprise to convince the country not to change horses in mid-stream. The timing was off and it failed. But, there was nothing to be gained by making a quick recovery and everything to be gained by profiting off some people's loss. (In the latter category I'd include, for example, George Herbert Walker IV, who walked away from the demise of Lehman Brothers with all the salvagable assets and moved on as a private hedge fund). That Wall Street is playing with a flood of dollars is not a happenstance. Recessions are a normal part of their buy low/sell high mantra.
              99% of the population are not worse off than they were 40 years ago because of one or two bubbles.

              Obamacare at your fingertips: 1-800-318-2596; TTY: 1-855-889-4325

              by hannah on Sun Dec 29, 2013 at 04:17:50 AM PST

              [ Parent ]

  •  So your position is there is no correlation (0+ / 0-)

    between Wall Street and Main Street?

    If I comply with non-compliance am I complying?

    by thestructureguy on Fri Dec 27, 2013 at 05:24:09 PM PST

    •  a weak one at best (5+ / 0-)

      if I were to make a gut call.


      To be sure, one would really need to research,

      how much the Banks invest "their" funds,

      locally in Main Street,

      vs globally in Wall Street, ever since deregulation.


      I suspect, Wall Streets vehicles are the profitable venture for them,

      Although, I have no hard evidence (yet) to prove that hypothesis.

      •  Wall Street and Main Street is a enthusiasm (0+ / 0-)

        for 1 percent and 99 percent.  Breaking a correlation means the actions of the 1 percent doesn't effect the 99 percent in terms of income equality. Or so it seems. I do believe there is a strong correlation between the two. Their increasing income is coming from somewhere. If out of thin air then we have no problem with their actions.  If coming out of the income of the 99 percent then we do have a problem and a correlation.  

        If I comply with non-compliance am I complying?

        by thestructureguy on Fri Dec 27, 2013 at 07:26:47 PM PST

        [ Parent ]

      •  Wallstreet is MORE than just the banks (0+ / 0-)

        Very short sighted response. Wall Street is MORE than just the banks.
        Every single company that's trading on wallstreet profits from a higher price of its stock. Obviously CEOs and Senior managements and the Warren Buffet of the world profit the most, but they are not the only ones to benefit. Many companies offer employees purchase plans, where employees can purchase shares at a lower price than the market price.
        As an example, Facebook valued at $21 vs Facebook valued at $50 is a massive difference.
        Do some research into General Motors stock/structure and you will see that the GM Union is a big owner of GM Shares, which has surged this year. A higher GM stock price helps boots the UWA.

  •  There is a correlation... (6+ / 0-)
    Recommended by:
    jbsoul, jamess, kurt, Burned, dagnome, BusyinCA

    ...but not in the way you think.   A damn good argument could be made that Wall Street succeeds not in spite of Main Street's struggles, but BECAUSE of them.   Corporations are reaping record profits because they're lowering their expenses by shedding jobs, pushing down wages, and slashing benefits, while the cost of the goods/services they offer stay the same or rise - thus increasing the bottom line.

    •  ^^^ THIS ^^^ aka ""The Big Squeeze" (1+ / 0-)
      Recommended by:
      jamess

      Consumers/workers are caught between ever-rising prices on nearly everything (goods, services, utilities) and stagnant or falling wages...

      This is all part of the plutocracy's plan to subjugate the previously powerful middle class and turn it into a compliant serf class, willing to work for shit wages in order to just break even each month.

      America's LAST HOPE: vote the GOP OUT in 2014 elections. MAKE them LOSE the House Majority and reduce their numbers in the Senate. Democrats move America forward - Republicans take us backward and are KILLING OUR NATION!

      by dagnome on Sat Dec 28, 2013 at 07:10:11 AM PST

      [ Parent ]

  •  "Unemployment and Profit... (2+ / 0-)
    Recommended by:
    jamess, kurt

    A Dirty Little Secret."

    [I]t really isn't much of a secret that Wall Street and corporate America like the unemployment rate to be a little high. But it is "dirty" in the sense that it is unspoken. Higher unemployment keeps wage growth down, and helps with margins and earnings - and higher unemployment also keeps the Fed on the sidelines...
    While the corporations may not want to see very high unemployment...
    ...a slowly declining unemployment rate (even at 9%) with some job growth is considered OK...
    Why Corporations Might Not Mind Moderate Depression...
    "...U is the overall unemployment rate...any individual firm has a negligible effect on U. But collectively they in effect determine U — and a high level of U, we’ve been arguing, increases their power over workers and hence their profits...

    ...there’s no rule saying that firms have to do worse in a depressed economy; they could actually do better...

    ...we have a depressed economy for workers, but not at all for corporations...A depressed economy may or may not actually be good for corporations, but it evidently doesn’t hurt them much...

    Top Ten Reasons Why Wall St. and Corporations like high unemployment Levels.  

     

    •  What we have here is the triumph of form over (2+ / 0-)
      Recommended by:
      kurious, katiec

      function. Corporations, being artificial bodies to begin with, have transitioned out of producing real goods and services into a totally symbolic existence. When financial corporations started touting bundles of obligations as "innovative products," that should have been a signal that American enterprise was moving lock, stock and barrel into the realm of the unreal.

      The dollars being toted up on Wall Street are figments of the imagination conjured out of thin air (electronically). They are IOUs with no actual commitments to back them up. If one compares dollars to marriage or birth certificates, then it is easy to imagine a truckload of certificates careening through the streets, regardless of whether or where they might be needed by anyone. The denizens of Wall Street are manic record-keepers, the very opposite of, if you will, county clerks who refuse to record same-sex marriages or out-of-wedlock births. That's why it was possible for forty trillion dollars to disappear in the crash of 2008. The Treasury replacing seven hundred billion was a lot like putting a pacifier in a baby's mouth -- a stop-gap solution that did nothing to get the dollars moving.

      Obamacare at your fingertips: 1-800-318-2596; TTY: 1-855-889-4325

      by hannah on Sat Dec 28, 2013 at 02:03:24 AM PST

      [ Parent ]

  •  Lots of Americans have a stake in Wallstreet ... (0+ / 0-)

    When the stock market was down a few years ago, lots of people (middle class Americans) complained they had lost all of their savings and retirements...etc because the market had gone down sharply.

    The stock market has gone back up and has reached levels higher than ever. The market has gone up more than 100% since the lows of 2009. Basically, if someone had 10k in the market, that money should be 20k today in the span of just 4-5 years.  So technically (and logically), those who had lost their savings from the 401ks should have recovered it by now (if they had left their money in the market, of course). Right? So, if John Dow had 100k in the Market, then John Dow should have 200k now.
    If John Doe got poor because of the stock market crash, John Doe has now doubled his/her investment in 4-5 years.

    What is wrong with this logic?

    I understand, there are still people on unemployment. I understand there are people who had debt and couldn't repay.

    But, there are tons of Americans, who are not Wallstreet experts, who are actually profiting from the boom of the stock market. I understand 401ks are not popular with lots of people on this site. I get that. But aren't people with 401ks, IRAs also profiting from the highs in the Market? This idea that only the 1% or Wallstreet are feeling better because of the stock market highs is very misleading.

    •  Wall Street thrives on management and (1+ / 0-)
      Recommended by:
      Egalitare

      transaction fees. If the value of stocks do not increase because nobody's selling, then the fees will consume the principle, just like debit cards and inactive savings accounts. Only initial public offerings have any relation to productive plant and equipment and sales of goods and services. Everything after is a convoluted ponzi scheme in which traders reward themselves for churning. Self-dealing is legal because the clients of brokers and dealers sign agreements to that effect. When one consents to being fleeced, the fleecing is not abusive. Informed consent covers a lot of mischief.

      Obamacare at your fingertips: 1-800-318-2596; TTY: 1-855-889-4325

      by hannah on Sat Dec 28, 2013 at 02:13:27 AM PST

      [ Parent ]

      •  True but doesn't answer my question (1+ / 0-)
        Recommended by:
        nextstep

        It is true there are fees associated with Investing. But if one chooses wisely, the fees are really very minimal. i.e. Vanguard doesn't charge any fees, if one invests in certain funds. Or in some cases the fees might be less than $20.

        You didn't answer my question. If someone lost their savings while the market went down, they should have recovered all their $$$ when the market went back up again, if they stayed IN the market. The idea that a recovering WallStreet only helps the 99% is false. It help ALL Americans who are invested in the market.
        If someone claims the contrary, then they should blame themselves, not the President.

        •  bepanda, you're sounding like Marie Antoinette (0+ / 0-)
          If someone lost their savings while the market went down, they should have recovered all their $$$ when the market went back up again, if they stayed IN the market.
          Do you really suppose that the people who got hurt by the recession were people who had $100,000+ in their 401(k)'s? I guess I have to believe you that folks who were already pretty well off, and who maintained their employment, and a salary that enabled them to sock away $$$ every month, probably did quite nicely, thank you very much.

          Are you aware that the majority of people live from paycheck to paycheck? They have no significant savings in the market to begin with. But suppose Joe Lunchbox had managed to build a $30,000 nest egg. What happens to that money if he loses his job? How does he "stay in the market"?

          Yeah, sure. Let them eat cake live off their stock market portfolio.

          Republicans proved in October that they are UNFIT TO GOVERN. Don't let the voter forget it. (-7.25, -6.21)

          by Tim DeLaney on Sat Dec 28, 2013 at 08:31:37 AM PST

          [ Parent ]

          •  Yes, there are people who live paycheck to paychec (0+ / 0-)

            But it is not the majority of Americans. Again, that's another myth.

            Income is not the only way the recovery is affecting people.
            Stabilization / increase in home prices is affecting people positively. More Jobs are being created. And People are moving again.

            Not everyone has profited from the  economy being back on track.   I get that.

            But people should stop acting as if Armageddon is upon us. A positive stock market is a positive sign for more than just WallStreet. It is a positive sign for most Americans. Let's stop vilifying everything Wallstreet.

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