View Full Version : Any economists out there?

April 25th, 2007, 09:11 PM
I know nothing of economics and just wanted to ask few questions.

I read the the Dow Jones has passed 13,000 for the first time. I remember maybe 5 or 6 years ago when it passed 10,000 for the first time. Does this mean that the American economy has grown 30% in those years? The FTSE 100 is at around 6,500 and as far as I can remember it has always been around that level, so again, does this mean the UK economy is stagnant?

Also, if it is true that the American economy has grown so much in a short period of time, how long can this be sustained? Will we end up with all the wealth in the world in the US?

April 25th, 2007, 10:34 PM
I'm not an economist, but I can tell you the answer is no. The stock market doesn't measure the economy; it doesn't even really measure the value of the companies whose stocks are traded on it. It only measures the going price for stock shares in those companies. To gauge the economy, you also have to look at a lot of other factors: employment rate, inflation, national debt, trade debt, etc.

As to your second question, the US already controls a very disproportionate share of the world's wealth; and no, I don't think that can't last much longer.

April 25th, 2007, 10:47 PM
To complicate things further: stock market growth can also be a sign of underlying weakness in the 'real' economy - if firms etc. are not making as much money as they are used to from their normal activities, then they may diversify into other areas, such as financial investments, as a means of safeguarding and expanding their capital, with the result of increasing the demand for shares and thereby driving up the price. This is precisely what happened in the run-up to the millennium crash. So, in short, the stock market values on their own show absolutely nothing about the underlying health of the economy.

April 26th, 2007, 01:48 AM
I don't want to get too political, but to answer your last question, our level of growth and development can be sustained for as long as the government keeps its hands off of private enterprise and free markets. A country's economic growth is basically directly proportional to the size of its government and the extent to which that government taxes/regulates the private sector. To prove my point you can look at the economic history of any Western European nation over the past 5 or 6 decades. They're all just humming along with little to no growth, mostly because they're technologically advanced welfare states. Italy's GDP even shrank 4% in 2005. The causes are questionable, but the fact remains.

April 26th, 2007, 01:55 AM
i think: growth of the stock markets doesn't meant growth of economy by the way, economics can not be seperated with politcs/political sense... but if you are talkin g about analysis of economic tabşes: yes it can be mostly based mathematics as well.

i took few economics classes only...