[lbo-talk] The Markets and Reality: What, If Anything, Is the Linkage?

[Brad DeLong]

>A question for the economists in the houseÖ
>
>
>As I type this, the DJIA is at 9006.91.  If the day
>closes on this high note, the public radio program
>ìMarketplaceî will play a snippet of ìHappy Days Are
>Here Againî and the host will offer some fey
>explanation of why the Dow seems to be climbing back
>towards 10K.
>
>Meanwhile, as every well read lefty, increasing
>numbers of conservatives and assorted ëalarmistsí of
>all stripes seem to know, there are deep dish problems
>with the USí economic situation that suggest a
>gotterdammerung crisis happening sooner or later.
>
>So, whatís the deal?  Whatís the real relationship
>between the Dow, NASDAQ, the rest of the marketís
>structure and the real, nuts and bolts, deficit, trade
>imbalance, crazy tax cut, overcapacity crisis, foreign
>capital infusion dependent, layoff and prolonged job
>search economy? 
>
>Is it possible for the Dow to look good while the
>countryís economic health is really quite bad?
>
>DRM

Lower expected future interest rates and stock prices go up. Raise 
expected future profits and stock prices go up. Raise expected future 
interest rates and stock prices go down. Lower expected future 
profits and stock prices go down.

Greenspan has been lowering expected future interest rates, so stock 
prices are going up. That's what's going on right now...

Brad DeLong