What's going on in the stock markets and why?

What's going on in the stock markets and why? The stock markets all over the world are going crazy, up and down, just like in the 1920s. Why? Let's break this down into what main pressure is pushing them up and what main pressure is pushing them down. UP. The majority of people have so little power in an overall labor surplus, that as technology raises productivity, they can't get raises to share in the profits. Where does the extra money go? It trickles up to the rich. What do the rich do with it? There's so much of it coming to so few people, that they don't have any way of spending it, so they "invest" it in the financial markets, and the financial markets go up up up. Doesn't it automatically flow out of the financial markets into jobs? No, because big stockholders who are also employees now have way more power and they can see to it that their salaries and benefits skyrocket upwards regardless of the fact that the majority of people's pay is standing still. Plus the financial markets keep inventing so many new kinds of stocks like mutual funds and derivatives and so many new kinds of mutual funds like index funds and contrarian funds, plus they hire so many more people (but still a tiny amount compared to the whole workforce), that the financial markets themselves become like a giant sponge out of which hardly any money escapes to the real world of middle class jobs, middle class earnings, and middle class markets. Money concentrates at the top, more and more, and tends to go straight into the financial markets because of lack of time to be more imaginative and because stocks are the only destination in the economy where price rises will be regarded as positive instead of as negative "inflation" (as they would if they went into wages despite crocodile tears over the "income gap").

What is pushing stocks DOWN? The concentration of money in the financial markets and in the top income brackets (the rich) gets so extreme, that a Black Hole effect begins. Little or nothing is leaving the massively wealthy core. The rich try to offset this by doing highly publicized acts of the charity to the dramatically poor people. But this is a tiny drop in the bucket and merely gives a slight effect of the expansion of the extremes, the very poor as well as the very rich. The huge middle continues to weaken, and it is the middle that provides the markets for all these companies in whose stocks the rich are pouring money.

So we have our consumer markets, our customer base, getting further and further behind - that's most of our overall markets (exports are just 12-15%) - and the thing based on them, our financial markets, getting further and further ahead - and more and more nervous and unconfident about that! Company earnings, which are supposed to be the fundamental basis of stock prices, lag further and further behind stock prices. Silly stock analysts keep saying, why are consumers spending their phenomenal stock gains? and the answer is that a only small percentage of people own most of the stocks and they don't have time or stomach to consume enough, and a large percentage of them have their stocks tied up in pension funds anyway. Those with the money don't have the time to spend it and those with the time to spend it don't have the money. That's another reason we have to balance TIME before we balance MONEY.

So the rich keep getting jumpier as there is obviously less and less market to support more and more of their stock holdings. Finally they start a cycle of stampeding out of stocks into currency, and putting it back into stocks to "get bargains." But as the whole airplane keeps getting more and more stretched out by the low consumer markets and the high financial markets, it just gets worse and worse. Very few of the rich ever think of investing in their own consumer markets in the obvious way, the employees of the companies they're invested in. That's too obvious and besides, their own employees are the ones they thought they were so smart for economizing on in the first place. That would mean they'd have to something new, like Henry Ford in the 1910s when he raised his employees wages enough over and above market forces for them to be able to buy the cars they themselves were making. (Of course, he could have just lowered the price of his cars too, and he did do some of that also.) Or they'd have to do something like Kellogg's Cereals between 1930-35 when they gave their employees 40 hours' pay for 30 hours' work and hired more people. There has simply been NO GUIDELINE on how to do this. ( Timesizing provides such a guideline.)

For more details, see our social software manual Timesizing, Not Downsizing, which is available online from *Amazon.com and at bookstores in Harvard and Porter Squares, Cambridge, Mass.

Questions, comments, feedback? Phone 617-623-8080 (Boston) or email us.

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