Economic News – Hype Versus Reality
No wonder most people don’t understand economics. Often what may seem good on one side, has bad side effects on the other side. For example, the stock market goes up – people will think that’s good! But that is largely due to rising prices for bad oil news. However, often the price of oil rises because “experts” believe that the economy is improving and therefore more oil will be needed in production – good news! But the increase in oil prices caused the cost of living to rise – bad news. But it helps Gross Domestic Product (GDP) – good news! But that then causes inflation – bad news.
But inflation means the economy is improving – good news! But then the Fed became worried about inflation and raising interest rates – bad news! Which causes the value of the dollar to increase – good news! But that is detrimental to exports because now American products are more expensive abroad – bad news! But that means foreign products are cheaper in the US – good news! But that hurts the competitiveness of American companies – bad news!
If we think that political analysis and political chat are often more hype than others, the same can be said about analyzing economic news! You can easily see why economic news is often confusing. Economic news is often confusing because – what is good for one consumer, might be bad for another – what is good for one company, bad for another – what is good for one sector of the economy – bad for another.
The stock market is often the most confusing. On days when there is “bad news,” the market often goes up, whereas on some days “good news”, the market sometimes goes down! While Dow, or S&P, etc., might go up, that doesn’t mean that the shares you own, will follow.
Too often, for the sake of voice bytes, the media are trying to over-simplify economic news. But economics by definition is quite complicated. One problem that there must be some agreement is that high unemployment is not good. But even in that case, “experts” cannot approve, or act on appropriate solutions.
he best way to think about economics is this – the difference between recession and depression is that it is a recession when it happens to others – it is depression when it happens to you!
It is my belief that a healthy economy requires certain factors – low unemployment; high consumer confidence; strong manufacturing sector; and reduce government deficits. That’s what we have to demand!