Stock Market Slide: What Does It Mean?
WASHINGTON - July 22 -
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."
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
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."
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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