U.S. Economy Is Weak Despite Strong Stock Market

by JASmius

This is becoming a recurring theme of late:

The record-high stock market does not mean the economy is strong, according to top economist Joseph Stiglitz.

Quite the contrary. The economy remains weak, Stiglitz, a professor of economics at Columbia University, tells CNBC, predicting that a "North Atlantic malaise" will continue.

The Dow Jones Industrial Average passed 17,000 last week, up 3% for the year and 14% higher than a year ago. News that the economy created 288,000 new jobs, pushing the unemployment rate from 6.3% to 6.1%, lifted stocks.

Despite the good news, Stiglitz is not optimistic.

That would be because that "good news" is horsepucky.  Like the fact that that six-point-whatever percent unemployment figure - the U3 rate that excludes the underemployed, "discouraged workers," and those of us that have disappeared from the labor force altogether because our unemployment benefits have run out, an aggregate total of nearly a hundred million Americans - is phonier than Kardashian mammaries.  The U6 unemployment rate, which does include all of us languishing in vocational limbo, is at least twice that, and some believe it to be above twenty percent.  And the fact that that "288,000 new jobs" figure consists of the addition of approximately 788,000 part time jobs offset by the destruction of half a million more full time (as in, with health care benefits) positions.

So Professor Stiglitz has good reason not to be optimistic.  Good thing he's trusting his instincts.

Stiglitz says he is "very uncomfortable" with current valuations of stocks.

"The reason the stock market is high, in part, is that interest rates are low, wages are low and the emerging markets are still growing much faster than the U.S. economy, let alone Europe."

Interest rates are low because the Fed is keeping them that way to mask the worthlessness of the gigantic U.S. debt and what it is doing to the dollar by massively subsidizing it.  Which also illustrates how Wall Street doesn't live anywhere but in the moment and seemingly revels in its incuriosity.

Many large U.S. corporations are getting much of their profits from emerging markets.

"These very strong stock market prices are in a sense a symptom of the weak economy, not a symptom that we are about to have a strong recovery to our real economy," he adds.

That was going to be my comment, but okay.

Growing income inequality is stifling the recovery, Stiglitz argues.

"In the United States, from 2009 to 2012, 95% of the gains went to the upper 1%. Ordinary Americans are using up their savings," he notes.

Growing income inequality is a product of the Obamapression.  Put another way, those that are wealthy will, by and large, remain wealthy (especially if they have gotten on the Obama bandwagon to protect themselves), but those that are not will now never get the opportunity to attain that economic status.

Put a third way, there has never been a greater disconnect between Wall Street and "Main Street" than there is right now.

Another plank in the Obama living legacy.