Today’s financial markets has been hardwired to see price movements of securities as having only one direction: up up and away!
And part of that programming has been to view bad news as good news. The reason for this schadenfreude outlook has been that bad news in the real economy extrapolates to more injections of government steroids. So Wall Street tacitly cheers and wishes for bad news, which they sell on the surface as good for the economy.
Aside from the depraved sense of ethics from bad news is good news, Wall Street’s benefiting from the massive transfers via government steroids has real effects on the economy.
One victim has been Small Businesses.
Small businesses, the largest employers or job providers in the US, has been lackluster, despite the statistical so-called economic recovery.
August’s Optimism survey report from National Federation of Independent Business (NFIB) chief economist Bill Dunkelberg (bold original)
Small business optimism remained flat in August, dropping 0.1 points from July for a final reading of 94.0. While the total reading showed essentially no change over the month prior, a look at the individual indicators reveals incongruent details. Job creation plans leapt to a level not seen since before the recession and sales expectations improved; but this optimism would appear to contravene the dramatic deterioration in quarter to quarter sales and profit trends. The favorable employment plans also contrasted sharply with the increasingly negative expectations for improved general business conditions. The month's performance proved poor, but expectations, pre-Syria, were looking up.
So buoyant financial markets have spurred a jump in job creation plans but real actions via sales and profit trends “contravene” this outlook. What people say and what people actually do are different (demonstrated preference).
Aside from the invisible transfers, lethargic activities of small businesses have been imputed to mostly taxes and government regulations.
In short the real economy suffers from uncertainty brought about by the trifecta of government induced factors: inflationism, taxes and regulation.
The so-called rising inequality has really been due to instituting policies favoring Wall Street at the expense of main street where the latter has been a recipient of transfers via Bernanke Put, zirp and QE channeled through higher asset prices.
And such dynamic reinforces the ongoing sentimental rotation from the tepid growth in the real economy and the selloffs in bond markets into the property and stock markets; The Wile E Coyote Moment
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