Posted by spaul on 03/16/2009
The Dow breaks 7,000 and suddenly we're on the road to recovery? No, Wall Street is recreating a fantasy bubble that shuts out the continued torrent of real and painful economic news from communities all across America.
Here's the economic news you may have missed over the past seven days:
The Fed reported that household wealth dropped 18 percent last year. As Justin Fox on the Curious Capitalist notes, U.S. households lost the equivalent of the combined annual GDP of Germany, Japan, and the U.K. in 2008.
In January, the U.S. trade deficit went up with China, despite the dramatic decrease in exports and imports across the globe. This is bad news, because it means more American manufacturing jobs will disappear and China will continue to accumulate piles of U.S. debt. The destructive cycle that helped to fuel the U.S. housing and credit bubbles shows no signs of abating.
Meanwhile, Europe continues to freeload during this global economic calamity. When Obama Economic Adviser Lawrence Summers and Treasury Secretary Timothy Geithner suggested that EU nations needed to enact greater stimulus measures, the response was icy: "Recent American appeals insisting that the Europeans make an additional budgetary effort to combat the effects of the crisis were not to our liking," said Luxembourg Finance Minister Jean-Claude Juncker. Trying to jumpstart the global economy is going to take more than a U.S. stimulus, but the vast majority of the EU (with the exception of Spain), along with Japan, Brazil, and other industrial powerhouses have so far not done enough to spur consumer demand, meaning that U.S. consumers will once again be asked to soak up overproduction from around the globe. That's one of the reasons why we got in such a pickle last year.
Jobs continue to disappear across the country. An RV manufacturer in Oregon will close two plants employing a total of 415 people. A paper mill in Dodson, Louisiana shutters, putting more than 130 people out of work. The iconic Viking Range Corporation is laying off 87 employees this week. Four hundred Steelworkers in Lorain, Ohio got the pink slip. And two auto parts suppliers in Kentucky are eliminating over 300 jobs.
The economic crisis is far from over. But CNBC's Mark Haines declared on Tuesday with some jubilation that the Dow's floor was 6,600. Good news? Hardly. Because it buries the fact that the fundamentals of our economy still aren't sound. We appear to be many months -- or even years -- away from creating jobs again, but the chatter from Wall Street detracts from the urgency of the situation we are in. A global stimulus, dramatic re-balancing of trade accounts, and focus on job creation are essential. Forget the Dow and think about the down and out.
This blog is cross-posted on The Huffington Post.