January 2, 2019 | Is the Stock Market a Measure of Economic Growth?

The past 10 years have created bubble stock markets all over the planet. Many think that this means that our economy has also grown and expanded globally. But is this a valid view of reality? The stock market over in Venezuela has increased some 29% in the past five days and some 98% in the past month. Did their economy also grow by similar %?

In reality, the economy of Venezuela is in a serious economic depression even as their Stock Market called the Caracas General increases daily. Similar situations have started to happen in Saudi Arabia, India, China, Brazil, Argentina, and other nations which have these electronic stock markets. Stocks can go UP and UP even as the general economy stagnates and/or declines and/or grows.

What we need to recognize is that our electronic stock markets operate in cyberspace and these electronic exchanges change mostly via algo and robotic trading activities. Some 70 – 85% of trading is now via algorithms and using high frequency computers. Automated trading (via algo’s and robots) allows markets to fluctuate UP and DOWN even as the general economy changes in other unique ways (both UP and DOWN).

Why this paradox/conundrum? The key to understanding this situation is to comprehend this idea called cyber trading. Cyber trading happens as computer machines operate to trade all our markets with no direct human involvement. I do not need to trade our markets today if I have an automated program (using algorithms) doing the trading for me. Algo’s and robots can trade 24/7 with no direct human involvement. Machines do all the trading and algo’s execute the trades.

Today, our electronic markets can go up 500 points in minutes and also down a similar number in minutes. Our general economy may not have changed one iota during all this change in trading. The electronic exchange over in Venezuela has crashed twice (once in 2017 and again in 2018) and it continues to get reset for new trading activity. But the general economy is in shambles as all this trading occurs (mostly via algorithms).

The same situation can happen with our electronic exchanges. All global exchanges are now electronic. The DOW could go UP and reach a new bubble level just as our general economy tanks via less consumer spending. The same situation can happen on the DOWN side. Stocks can go down even as our general economy produces and distributes an increase in actual products for consumers to purchase.

There is a serious problem with our monetary system today. Money can be divorced from measuring the real economy. Trading (digits) can cause these cyber markets to go UP and DOWN even as our economy (real production) changes outside this trading activity. Our money, today, is essentially living within our consciousness and it may not be measuring real economic activity realistically.

Our cyber money lives within cyberspace. What is cyberspace? It is a space which results from the connection of computers into a network. This space (is not real space) but an artificial space. Many call this space ‘virtual’. This means that it is not real. Virtual space lives within our consciousness (not out in observable space). Our markets are now mostly virtual and this means they are divorced from our real economy of production.

Economics is supposed to measure the creation of material wealth. Material wealth comes from the land (oil, wheat, lumber, steel, copper, etc.). When our monetary unit was ‘tied’ to a material item (say gold) than measurement was more accurate. Today, our money is ‘tied’ to nothing but the inner consciousness of our bankster administrators. This is ludicrous and it does not ‘measure’ our wealth creation accurately. I call this insanity!

We have a bifurcated marketplace today. Money is now a digit in cyberspace and real wealth comes from the land. Money is metaphysical and production is physical. This conundrum creates our bifurcated/distorted/manipulated marketplace. All this bifurcation will eventually lead to a crash of these cyber markets. I sense that this will happen in 2019. Prepare now by getting into some silver/gold/tangibles. Enjoy!

I am: https://kingdomecon.wordpress.com.

Don Swenson January 2nd, 2019

Posted In: Kingdom Economics

Next: Unintended Consequences »