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FOR IMMEDIATE RELEASE
JULY 22, 2002
3:55 PM
CONTACT:  Institute for Public Accuracy
Sam Husseini, (202) 347-0020; David Zupan, (541) 484-9167
Stock Market Slide: What Does It Mean?
 

WASHINGTON - July 22 -

  • ELLEN FRANK, frank@emmanuel.edu
    Professor of economics at Emmanuel College in Boston and author of the forthcoming book Money Illusions, Frank said today: "For the last 10 years or so, the broad public has been encouraged, mostly because of 401(k) plans, to regard the stock market as a safe place to invest retirement funds and obtain consistently high, if occasionally volatile, returns. Small investors have been led to believe that a buy-and-hold strategy will yield a certain 7 percent return, when it almost certainly will not. Stock prices have risen faster than the economy, than sales, than corporate profits. This simply can't continue. Insiders have been bailing out, leaving small investors to suffer the losses. What the U.S. government should be doing is developing retirement programs that are safe, secure, stable and not dependent on stock returns. The decline is of course a compelling argument against Social Security privatization."

  • DEAN BAKER, dean.baker@worldnet.att.net, www.cepr.net, www.accuracy.org/press_relases/PR031301.htm, www.msnbc.com/news/783948.asp
    Co-director of the Center for Economic and Policy Research and the author of the article "The Costs of the Stock Market Bubble," Baker said today: "The 1998-to-2000 stock bubble was completely transparent to any economist or analyst who looked at it seriously. The public has every right to be scared about our political and economic leadership."

  • DOUG DOWD, aplusd@tdl.com, www.dougdowd.org
    Dowd is author of the book Understanding Capitalism and the article "The New Economy: Stairway to the Stars or House of Cards?" He said today: "The stock market now is playing very much the same role it did in the late '20s; it got very seriously inflated then as it did the last five or six years. It's largely driven by euphoria. What has been keeping the economy going is debt -- household debt and international debt. The debt has to continue to rise for the economy to continue its course, but the debt can't continue to rise indefinitely. So much has been based on borrowing, borrowing, borrowing. It's likely that there will not be a panic just in the market, but throughout the economy."

  • ROBIN HAHNEL, rhahnel@starpower.net, www.zmag.org/bios/homepage.cfm?authorID=68, www.southendpress.org/books/panicexc.shtml
    Professor of economics at American University, Hahnel is author of Panic Rules! Everything You Need to Know About the Global Economy and the forthcoming The ABC's of Political Economy. He said today: "The essential problem is that we've tied the real economy of production and consumption -- which is what most of us care about -- ever more tightly to the fortunes of the financial sector that has been made much more volatile and crisis-prone by liberalization and deregulation of financial markets. While changes in the financial sector have provided new opportunities for speculators to increase their wealth, the increased fragility of the financial sector does great damage to the real economy. The depression in East Asia that followed the Asian financial crisis of 1997-98 was one poignant example.... The problem is clearly not just evil CEOs; the regulatory framework dating back to the New Deal has been scuttled...."

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