there are three big points of slippage between stock prices and the success of the economy in general. First, stock prices reflect profits, not overall incomes. Second, they also reflect the availability of other investment opportunities — or the lack thereof. Finally, the relationship between stock prices and real investment that expands the economy’s capacity has gotten very tenuous.
On the first point: We measure the economy’s success by the extent to which it generates rising incomes for the population. But stocks don’t reflect incomes in general; they only reflect the part of income that shows up as profits.
.. On the second point: When investors buy stocks, they’re buying a share of future profits. What that’s worth to them depends on what other options they have for converting money today into income tomorrow. And these days those options are pretty poor, with interest rates on long-term government bonds not only very low by historical standards but zero or negative once you adjust for inflation.
.. how can profits be so high? The answer, I’d suggest, is that these days profits often seem to bear little relationship to investment in new capacity. Instead, profits come from some kind of market power — brand position, the advantages of an established network, or good old-fashioned monopoly.
.. while record stock prices do put the lie to claims that the Obama administration has been anti-business, they’re not evidence of a healthy economy.
Soros: Brexit’s effect on real economy comparable only to 2007-2008 crisis
Whether Mr. Soros took any positions to profit from a Brexit is unclear. A day after the referendum, he warned of the consequences of the Brexit vote.
“The consequences for the real economy will be comparable only to the financial crisis of 2007-2008,” he wrote in a post on the opinion website Project Syndicate.
Why the Remain Campaign Lost the Brexit Vote
With the exceptions of London, Scotland, and Northern Ireland, every major region of the U.K. voted to exit the E.U.
.. One of the best predictors of how people voted was their education level. Those with college degrees tended to opt for Remain, while people without them tended to opt for Leave.
.. The older and poorer you are, the more likely you were to vote Leave. The younger and richer you are, the more likely you were to vote Remain.
.. The Leave side went up in the polls after it managed to shift the debate away from the likely economic impact of Brexit and onto immigration and issues of national sovereignty. Although much of the immigration into the U.K. comes from outside of the E.U., the Leave forces were able to focus attention on the freedom of movement for workers, which is one of the founding principles of the E.U.
.. economic anxieties and resentments underpinned the political anger that fuelled the Leave vote. Demagogues such as Nigel Farage, the leader of the U.K. Independence Party, were able to exploit these economic worries, directing them against immigrants and other easy targets.
.. the best predictor of voting patterns wasn’t income or education levels but attitudes toward the death penalty, which are a proxy for authoritarian attitudes more generally.
.. “Wealthy people who back capital punishment back Brexit. Poor folk who oppose the death penalty support Remain.”
.. “The legacy of increased national inequality in the 1980s, the heavy concentration of those costs in certain areas, and our collective failure to address it has more to say about what happened last night than shorter term considerations from the financial crisis or changed migration flows.”
.. the Remain vote was consistently stronger in prosperous areas. Economics matters.
.. he pledged to hold a referendum at some point before 2017. At the time, this was an easy promise to make: Cameron believed he couldn’t deliver on it.
.. Rather than accentuating the positive, Cameron and George Osborne, the Chancellor of the Exchequer, sought to scare the electorate into voting their way, arguing that a vote for Leave would plunge the U.K. economy into a recession and cost the average household about sixty-two hundred dollars a year.
.. Almost all economists agree that the E.U. has been good to Britain. But the sixty-two-hundred-a-year figure was so large, and so specific, that many people didn’t believe it.
.. the negative campaign, which was dubbed Project Fear, had backfired.
.. Rather than winning people over, it alienated many voters who had legitimate concerns about the E.U. “People have expressed real anger at being ignored by the system, and I think this is at the heart” of what happened, Hilton said.
.. the fate of the Remain campaign should serve as a reminder of the limits of negative campaigning—a reminder that Hillary Clinton would do well to take note of as she goes up against Donald Trump. In confronting populist demagoguery, it isn’t enough to attack its promulgators. To get people to turn out and vote in your favor, you also have to give them something positive to rally behind.
.. It claimed that liberating Britain from the shackles of the E.U. would enable it to reclaim its former glory. The Remain side argued, in effect, that while the E.U. isn’t great, Britain would be even worse off without it. That turned out to be a losing story.
One Economic Sickness, Five Diagnoses
Over the last decade, the growth rate of real G.D.P. per person has averaged just 0.44 percent per year, compared with the historical norm of 2.0 percent. At a rate of 2.0 percent, incomes double every 35 years. At a rate of 0.44 percent, it takes about 160 years to double.
.. A statistical mirage
.. Think of how your smartphone now replaces your camera, GPS, music system and various other previously stand-alone devices. According to this theory, the problem is not in the economy but in the statistics.
.. A hangover from the crisis
.. Secular stagnation
.. reduced demand for capital to fund investment projects. He cites several reasons for the change, including lower population growth, lower prices for capital goods and the nature of recent innovations, like the replacement of brick-and-mortar stores with retail websites.
.. inability of the economy to generate sufficient demand to maintain full employment.
.. Slower innovation
.. This generation’s innovations, like the smartphone and social media, are just not as life-changing.