Wall Street vs. Main Street
As if it were still celebrating Independence Day, the Dow Jones Industrial Average rose to an all-time high on July 12. The Wall Street Journal reports the 284 point surge as “the biggest one day gain in four years.”
This leap took place at a time when the economy is wrestling with some nasty problems, like the slump in housing and rising energy costs to a drop in China’s stock market, as well as growing resistance by banks to extend loans for corporate takeovers.
For most Americans, the question is just how these ins and outs on Wall Street affect their daily lives. A bit of history may be helpful.
In June of 1929, the government reported that the industrial index took a precipitous drop. That was bad news in a country that, at the time, counted industrial production as its backbone, whether in making autos or garments.
But, perversely, the stock market zoomed upward. Why?
One possible explanation was that many movers and shakers in the world of industrial production, facing a threatening future, began to get rid of their involvement with industry and turned their bucks into playing the stock market.
Meanwhile, their former employees joined the army of jobless. By November of 1929, the economy collapsed for lack of a market. The Great Depression hit America. And the stocks that were to enrich the once-rich were now not worth the paper on which they were written.
Query: Are we in for a repeat of 1929?