The Coronavirus pandemic is revealing several issues and facts, knowledge not that apparent to many people.
One, of course, involves President Trump. Perhaps (I hope) more people have realized this year that Trump is as ignorant, corrupt, morally challenged, and psychologically compromised as many of us have argued all along.
I hope that another insight revealed is that the United States does not do everything better than any other country, as is popularly thought. How can that be when Canada, because of the coronavirus pandemic, gives its qualified citizens $2,000 each for four months while we provide a mere $1,200; and Germany and Italy test their citizens for COVID-19 about twice the rate of the United States.
Further, South Africa, with one-sixth the population of the United States, has four times as many contact tracers. These are the detective-like people who track chains of contact of persons with COVID-19.
But my emphasis today is on finances—the economy and the stock market. As would be expected, the stock market plunged at the beginning of the coronavirus crisis in the United States. But in recent days, stocks have been increasing in value as more companies closed, and more Americans lost their jobs. More Americans are unemployed right now than at any previous time in history. The economy is falling off a cliff. Yet, stock prices which fell at the beginning of the crisis, are currently climbing.
In trying to explain this, Paul Krugman, a Nobel prize-winning economist, notes two things. First, buying stock in companies that are still profitable despite COVID-19 is more attractive than other options. Second, as Krugman puts it,
“Whenever you consider the economic implications of stock prices, you want to remember three rules. First, the stock market is not the economy. Second, the stock market is not the economy. Third, the stock market is not the economy.”
This fact became apparent to me back in the 1980s when large corporations were busy borrowing money and buying other companies. They would eliminate parts of these acquisitions to save jobs and retain those parts that made the corporation look good.
Before that time, when corporations borrowed money and expanded, it was good for the economy as they would do so to create more “widgets,” which required more workers—good for the economy. Starting in the 1980s, they were eliminating workers and their costs, a good thing only for their stock prices and their shareholders—but not good for the economy.
Dutifully and daily, television news tells us about the stock market as if it is related to the economy, when it is only relevant for people with stocks.
This reminds me of another of my pet peeves–the unemployment rate. Last year much ado was made about the unemployment rate among African Americans falling to 5.5 percent for the first time.
Many African Americans looking at this news would experience a severe disconnect as they would turn from the television, look out their windows, and see a large number of black men not working. Paraphrasing Krugman, not working does not mean being unemployed. To be counted among the unemployed, one must be actively seeking work. That is the 5.5 percent number last year. At the same time, one-third of all black men were not working and had quit seeking employment. Thus, around 40 percent of black men did not have jobs last year.
By not being more forthcoming about the real meaning of some issues—e.g., the stock market and the unemployment rate—we are causing some people to ignore all our statistics.