Economy Du Jour: November 2, 2009

What People Are Talking About Today on Wall Street

A major stock market index took a big hit last week with Friday's drop of 250 points. Things are looking at little better this morning if futures are the right indication. After significant drops in stock prices, it's typical for people to "buy on the dips." Stock market volatility may provide profits and joy on Wall Street, but Main Street's economic health requires a different outlook. Unemployment figures are close to ten percent after the Obama economic team speculated it would not exceed 8.5 percent with the stimulus plan in place. With regard to unemployment, the Obama administration announced yesterday that its economic program had "created or saved" 640,000 jobs. Critics have called this figure a "hat trick" and question how "created or saved" can be measured when overall unemployment has increased.

The Federal banking system is still operating on a policy of "quantitative easing." If that term seems unfamiliar, don't worry. The practical meaning of "quantitative easing" is loose monetary policy, low interest rates, a dollar that doesn't buy as much or pay as much in wages, and a manna-from-heaven cascade of low-interest dollars into the economy through large financial firms. Still don't get it? Good—that's why it's called "quantitative easing." You're not supposed to get it. If you got it, you might get angry, lose confidence in the economy and stop spending. On the plus side, the loose monetary policy is designed to make American products cheaper so that we can export more and get Americans working again. The good news is that U.S. exports have improved; the bad news is that corporations are producing more without hiring unemployed workers back.