(WASHINGTON - February 28 --
Co-director of the Center for Economic and Policy Research, Baker said today: "A lower stock market is good for a lot of people. If corn prices fell 30 percent, that would be bad for you if you're a corn farmer, but good for you if you weren't and ate a lot of corn. Stock ownership is highly concentrated; 75 percent of the population holds little or no stock (including retirement accounts), so if stocks go down and you don't own any, you're better off.
"When stocks plunge in value, it's similar to a situation where there are trillions of dollars in counterfeit currency, held by a small group of people, and the police seize and burn it. This is good news for the rest of us because the trillions of dollars of counterfeit money will not be bidding up the prices of things like houses and cars. Any honest economist would have to concede this point -- it's elementary economics, but many economists tend to cheer the stock market, in effect favoring the wealthy at everyone else's expense."
Baker's most recent book is "Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer."
He added: "Greenspan, as head of the Federal Reserve in 1987 intervened to bail out the stock market. The federal government takes as a goal higher stock prices -- they don't have higher wages as a policy. In retrospect, this intervention set the stage for the stock bubble of the 1990s. The U.S. government in effect subsidizes stock owners, who tend to be wealthier."
Henwood is editor of Left Business Observer and author of the book Wall Street. He said today: "We won't know for a few weeks whether yesterday's 416-point decline in the Dow Jones Industrial Average was just one of those seizures that financial markets experience now and then -- and so of concern to just a handful of speculators -- or something of broader economic significance.
"But the market did seem worried about some real things, a departure from about five years of profound complacency. There's the possibility of a meaningful slowdown in both the U.S. and Chinese economies, which have become so tied together that trouble in one means trouble in the other; the bursting of a speculative bubble in Chinese stocks; and the chance that troubles in the U.S. housing market, which Wall Street has declared to be largely over, are actually getting seriously worse."