The Market Is Not the Economy

CrownThomas's picture

As everyone gets caught up in the euphoria of an ever rising S&P, remember that once upon a time, in a land far, far away, the economy was driven by goods produced and services provided instead of the amount of excess reserves banks can use to bid up market prices with.

Today however, the health of the economy seems to be lumped into the level of the S&P 500. Of course, with record deficits, and a record fed balance sheet, the message now is that everything is fixed - the economy is healed. This, as ZH readers can surmise, is complete nonsense. However, since we are ruled by a "new keynesian" elite, and they are supported by their media arms, well, they control that message.

One would think that the market levels would reflect the strength of its underlying components (at least to a degree). One of those components is the PMI. This index gives an indication of how the manufacturing segment of the economy is doing - you know, the segment that is actually producing goods.

The PMI has flatlined since about April 2012, and the level has been bouncing around 50 (a level of >50 indicates an expansion), with January 2013 ticking up to 53.1. During this time, the S&P has completely ignored the fact that our manufacturing segment is struggling, and has soared to new heights. This of course, is all that matters now, as the message is that as long as SPX, RUT, etc, are vertical, the economy must be healthy.



Carry on gentlemen, carry on.

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Fuh Querada's picture

Which market(s)?
And please compute the statistical significance of the divergence between the two plotted lines. R. Tsay's book on time series analysis is recommended.

“Rebellion to tyranny is obedience to God.”-ThomasJefferson's picture



We live in a reality where the government lies to us. Our media lies to us. Our banksters lie to us.  

I believe this is how the 1970's and early 80's victims of Soviet propaganda were earlier spoonfed nonsense.

All that's left to do is live your life, while waiting for this house of cards to certainly fall.

Really sucks that we've fallen so far so quickly, all in the name of "protecting freedom"!

Grand Supercycle's picture

Get Ready Bears...

Wile E. Coyote overdue sell off awaits as SPX daily & weekly charts continue their protracted topping process from current
extreme levels.

madcows's picture

If you are going to steal article ideas from my comments, I'd at least like some recognition.

MFLTucson's picture

For now its the only economy we have!

rsnoble's picture

This kind of article is no longer a newsflash even the cows understand it now.

LongSoupLine's picture


You need to overlay FMI to see the "rally" and "recovery".

FMI= fiat manufacturing index

Fuck you Bernanke. Fucking stinking asshole.

q99x2's picture

Robots are everywhere. TAX them locally.

ebworthen's picture

Thank you for that.

Building perception by spending $85 Billion a month to prop the banker casino is a fool's game.

Until career employment and production of goods and productive services this is a train wreck waiting to happen.

The only catalyst I see for the U.S. actually employing people at living wages to produce actual goods and productive services is either construction of the Death Star or WWIII.

wonderatitall's picture

we gots to gets dat booooosh out of der. god damn white devil

Never One Roach's picture

Fed's balance sheet will most likely beat $4 trillion by Q4:

Peter Pan's picture

For the S&P 500 to be seen in its proper perspective, one needs to have an accompanying graph showing the ownership of the S&P 500 by population percentile over a period of years.

In other words, the S&P 500 at present is about as meaningful as using a Mercedes Car Showroom to draw conclusions about the level of wealth in the general populace.

neutrinoman's picture

Oh, pish-posh, why are we talking about something so old-fashioned as goods and services? We've moved on from Keynesianism to MMT, you see, and the central bank *creates* food, drink, haircuts, automobiles, overpaid lobbyists and lawyers, sex services, and so on as it "spends the economy into existence" .... Get with the program, people!

andrewp111's picture

Yeah, but the dependencies on the stock market are now huge and growing. It works until it doesn't. If the S&P 500 should be cut in half by any kind of external shock, there will be huge numbers of insolvencies and bankruptcies. Pension funds, insurance cos, leveraged banks, and many others will go bust immediately. The containment of the Depression will have been broken. Will the Fed move heaven and earth to prevent this? Of course they will. Can they float the market forever? That is the 1000 Trillion dollar question.

Whatta's picture

I like it when the market goes up

Makes me feel all soft and squishy inside

I luv it when the TV tells me all is well. The TV is truth.

Dollar Bill Hiccup's picture

Ben Bernanke 2004 on the "Great Moderation", where bond yields and interest rates fell for 20+ years, equities rallied for 20+ years, and HE had become OMNISCIENT !


Remarks by Governor Ben S. Bernanke
At the meetings of the Eastern Economic Association, Washington, DC
February 20, 2004


The Great Moderation, the substantial decline in macroeconomic volatility over the past twenty years, is a striking economic development. Whether the dominant cause of the Great Moderation is structural change, improved monetary policy, or simply good luck is an important question about which no consensus has yet formed. I have argued today that improved monetary policy has likely made an important contribution not only to the reduced volatility of inflation (which is not particularly controversial) but to the reduced volatility of output as well. Moreover, because a change in the monetary policy regime has pervasive effects, I have suggested that some of the effects of improved monetary policies may have been misidentified as exogenous changes in economic structure or in the distribution of economic shocks. This conclusion on my part makes me optimistic for the future, because I am confident that monetary policymakers will not forget the lessons of the 1970s.


bunnyswanson's picture

You've failed to consider globalization and the plans in place to reorganize the status quo.  The faith you have that these bankers have the best interests of Americans at heart is your fatal flaw.  Globally, the chairs on the titanic are being rearranged.  The middle class are not included in this equation, that is, not now after their assets have been transferred into the possession of the banks.  Deflating the value of real estate has been a success and the sales of same to investors/foreign countries has been underway for years.

Without jobs for blue collar workers and IT, this equation has left several hundred million people across the developed nations without a source of income. 

Elites can forcast their future which may be indeed rosy.  But the American tax payer who has just been fleeced is nothing more than in the way, entitlements will never take precedence over military spending.  Fed Reserve will foreclose on America because it is the interest of the global financiers who we all now have sent us all to where we are today.  Pulling back for a few years to calm the herd may occur but all that is needed is to get the guns and that will be an issue that has been handled in history in a manner we are familiar with. 

This is a heist.

LawsofPhysics's picture

Precisely.  Good luck with the guns, many now believe their lying eyes and are preparing.  Besides, I do not see the supply lines holding much longer.  Lot's of things could happen "on paper", in the real world possession will be the law. Sort of reminds me of all those "gun free zones" the world has on paper.  How is that working out, by the way?

NOPOMO's picture

Bernanke believes the Market Crash caused the Great Depression and not the Great Depression caused the Market Crash.  So Bernanke believes as long as he can hold the market up a Depression will not occur.  Foolish thinking for a man that believes he knows more than everyone collectively.



andrewp111's picture

Bernanke knows the Depression was caused by a wave of cascading bank failures. The stock market played a role in initiating that wave, but was not the primary cause. He also knows that today, the financial industry has a much greater dependency on the stock market than it did in 1929. A collapse of the stock market is about the only thing that could cause a wave of global bank failures today.

madcows's picture

Nope.  Massive leverage caused the banks to fail.  Massive leverage that couldn't be paid back.  The banks made too many risky loans, chasing money.  When people couldn't pay back the loans, the banks failed.  So,  the bank failures were just a symptom of the problem, and not THE problem.  It's not different than today.  Unsustainable debt caused the great depression, and it caused the Great Recession... soon to be depression. 

neutrinoman's picture

The US economy started contracting in the spring of 1929, about six months before the crash. Financial markets are symptom, not a cause. In our case, they're a symptom of central banking gone wild.

disabledvet's picture

I think a better question to ask is "why do Central Bankers feel a visceral need to explode the economy all the time." The only reason we didn't have a total implosion from Greenspan blowing up the tech bubble is because of 9/11 (how's that for timing.) Then of course "can't have people getting paid and living good" so this same phucker followed that first act up with a "reprise role of the title character in Psycho" ... and this time "the world economy was in the shower all alone." The madness of course continued with that French Phucktard Trichet who actually HIKED interest rates while the USA was bailing out the Belgian Bank Dexia. Now it's coming out that the head of ECB is up to his eyeballs in "making debt disappear" for the totality of the Italian banking system "back in the day." every one of these stinking phucks is TOTALLY CORRUPT AND WORTHLESS. I have to give Bernanke his due cuz "he decided to do something different"...notice i did not use the word "right" to describe his actions...what the hell. At this point "where the hell is right anyways?" At this point "just give me my book deal bitch and i'll be on my way." Unreal that no one gets arrested for this..."except for the midwestern guy who was on the television all the time." talk about small fry. to paraphrase Napoleon "lose a in jail. Lose a TRILLION and it's a bailout and bonus time."

mtomato2's picture

You don't have to say "phucks" here.

They let the real one get through.

scrappy's picture

I saw a similar chart here with a very different analysis.



Setarcos's picture

Well worth a look IMO.

espirit's picture

I think he means that when all we make here is dollah bills (i.e. debt), and nobody wants to buy them anymore, the end is near.

eddiebe's picture

I'm sure this means a lot of things, but I don't know what it means to me. The madness has gone on a lot longer than I expected, and it probably will continue for a lot longer still.

mtomato2's picture

IKR?  (teenspeak for: "I know, right!?")  I have a house full of teens, so give me some slack...

I remember way back in ought 9 or 10 when I sincerely hoped that reality would rear it's beautiful/ugly head and make things bad/better again.  My problem was, as Cognitive Dissonance has so succinctly pointed out in his recent columns, I was living like that would actually happen.  I believed in Truth and Honesty.  And Cause and Effect.

No longer.  I am learning to live in my new normal, where only the dishonest and the shysters prosper, and the best I can hope for, at least in my demographic, is to struggle and plod.  Without the hope that a correction, whatever that looks like, will occur and make things, um..., "fair" again.

My bad.  I worked really hard and made a bunch on money the last twenty years, but I didn't save it.  I spent it on things of no lasting value, in many cases.  I was an idiot.  But that was mostly because I thought the system was honest and the virtuous prospered, and there was no pending engineered slo-motion collapse.

So now I am of a different mind.  A "muddle through" mind.  I am








EnslavethechildrenforBen's picture




oh, you mean that enormous crater over there where the economy used to reside...