C.S. Hayden's Blog

Dow above 9,000 -- now what?

Except for the Austrian School economists, hardly anyone is worried that the extensive restructuring [e.g., bankruptcies, ending failed projects, reallocation of capital toward productive uses, etc.] necessary to put the economy back on a healthy, market-sustainable track is not being carried out – or, certainly not being carried out on the scale that the current situation requires. For the overwhelming majority of today's investors, economists, and policy makers, output is output, and spending is spending. They are blind to the mountain of malinvestments staring them in the face. In the seventy years since John Maynard Keynes steered macroeconomic policy thinking into the dead-end street of misleading, highly aggregative thinking, tremendous damage has been done, but clearly a great deal of additional damage will have to be suffered before the people who bear the burdens of this kind of policy-making awaken to its operation as a mechanism for robbing the many for the benefit of the politically connected few.

Stock market investors shrug off a disaster in our midst: mass layoffs. Investors act as though it will soon be business as usual. Companies cut costs by firing employees that have been with them for decades. Then the companies can report higher earnings from cost-cutting measures. The media then proclaim an increase in earnings. But how will these increases be sustained? How will an unemployment rate of 11% help get the economy back on its feet?

posted by C.S. Hayden @ 12:30 PM