new economy & market gains

Marta Russell ap888 at lafn.org
Sun Oct 3 11:18:01 PDT 1999


Thanks Doug,

I had a feeling I was barking up a tree that might be virtual reality but couldn't quite decipher why.

Marta

Doug Henwood wrote:


> Marta:
> >Is there anything out there which shows how much
> >stock market gains (increase in personal wealth
> >for the few) have contributed to the "economic
> >boom" ? I'm not sure what form such a tabulation
> >would take-- a percentage maybe?
>
> That's really hard to say. After controlling for macro variables like
> interest rates and cash flow, the stock market offers no additional
> explanatory value for real investment. Over the long term, the
> relation to consumption is also hard to prove. In other words, it's
> hard to say how changes in fictitious values influence real economic
> behavior. But the last few years have been so off the charts,
> bubblewise, that maybe normal relationships don't apply. And, as
> Minsky says, the stock market passes judgment on leveraging and other
> financial practices; the bull market has probably made people a lot
> more confident about borrowing and investing than they would
> otherwise have been, but I'm not sure how you'd quantify that.
>
> I can think of some areas where the bull market has had big real
> world effects, though. Wall Street money has created a nutty real
> estate market and more gentrification in NYC - this cycle looks like
> it'll take significant steps in the g'fication of Harlem. (Walking
> around NY these days is a big reminder how the bourgeoisie plans -
> the transformation of Harlem has been in the works 20 years or more,
> and the transformation of the lower Hudson waterfront is older - a
> culmination of the whole scheme of pushing development westward.)
> Cities where IPO money has flowed - SF, Seattle, Portland - have seen
> similar booms, as far as I know.
>
> And then there's the ideological effect, stimulating popular approval
> of capitalism, esp the U.S. kind, and increasing its prestige.
>
> Doug



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