4 ms·

The stock market is not the economy.

• mjevans 7y ago
  It doesn't even seem to be a real index on economic activity anymore either... In my personal view 'The Market's purely reflect consumer confidence. They appear divorced from actual reality, aside from how that affects the mindset of easily panicked lemmings.
  • kqr 7y ago
    Money purely reflects consumer confidence, and as long as the economy is based on money, so does the entire economy.
    • Dylan16807 7y ago
      Not really. There's tons of steady demand to drive money forward. You can double or half average consumer confidence and it won't change the price of a burger or a t-shirt.
      • woofie11 7y ago
        One consumer? No. All consumers, it definitely will.
        • Dylan16807 7y ago
          How big of an area do you need to see this effect? I've never heard of this kind of pricing difference on a city, county, or state basis. And the stock market varies wildly on a daily and monthly basis without affecting the prices of almost anything. It seems clear to me that money is not even close to affected by consumer confidence the way the stock market is.
          • kqr 7y ago
            The difference in this case is that the stock market is a highly efficient process, where feedback paths are short, information is shared widely, and there is potential to make a lot of money on other's misjudgements, automatically correcting the price in the process. This means changes in confidence are almost immediately reflected in the price. T-shirts, on the other hand, much more slowly change to match confidence, for the same reasons. If you think people collectively over- or undervalue T-shirts, it is rather hard to make money off of that mistake. In part because it implies moving physical stock, but also because they are a relatively refined product. Markets for natural resources see some of the same fluctuations as stock markets, although not to the same degree.
            • Dylan16807 7y ago
              Thinking something is over or under valued is very different from general confidence in the economy. In daily life you're not betting on the economy, you're part of it. You work and spend even if you think the nukes are going to kill everyone. Confidence has a vastly weaker connection to demand for goods.
              • woofie11 7y ago
                If people think the dollar is significantly overvalued, they'll switch to gold, bitcoin, rolls of toilet paper, or other forms of ad-hoc currency. That's what happens in countries with 1000% inflation, for example.