ROBERT B. REICH, Chancellor’s Professor of Public Policy at the University of California at Berkeley and Senior Fellow at the Blum Center for Developing Economies, was Secretary of Labor in the Clinton administration. Time Magazine named him one of the ten most effective cabinet secretaries of the twentieth century. He has written thirteen books, including the best sellers “Aftershock" and “The Work of Nations." His latest, "Beyond Outrage," is now out in paperback. He is also a founding editor of the American Prospect magazine and chairman of Common Cause. His new film, "Inequality for All," is now available on Netflix, iTunes, DVD, and On Demand.

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COLBERT REPORT, NOVEMBER, 2013

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DAILY SHOW, SEPTEMBER 2013, PART 1

DAILY SHOW, SEPTEMBER 2013, PART 2

DEMOCRACY NOW, SEPTEMBER 2013

INTELLIGENCE SQUARED DEBATES, SEPTEMBER 2012

DAILY SHOW, APRIL 2012, PART 1

DAILY SHOW, APRIL 2012, PART 2

COLBERT REPORT, OCTOBER, 2010

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DAILY SHOW, OCTOBER 2008

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DAILY SHOW, JUNE 2004

  • The Stalled Recovery, Smoke and Mirrors, and the Carnage on the Street


    Friday, June 10, 2011

    The Dow ended the week below 12,000 for the first time since March. This is the sixth straight week of downs for the Dow. It’s almost as bad over at the Nasdaq. All the gains racked up in 2011 have now been erased.

    What’s going on?

    The real economy is catching up with the financial economy, as it always does eventually. Wall Street is built on smoke and mirrors, while the real economy is based on jobs and wages. Smoke and mirrors can only take you so far – as we learned so painfully three years ago.

    Jobs and wages stink, if you haven’t noticed. They’ve been bad for months, even before this week’s data made it fairly clear the recovery has stalled.

    Stock prices had been rising nonetheless. That was partly because big corporations were enjoying big sales and fat profits from their foreign operations. But foreign sales are slowing. Chalk that up to the European debt crisis, Europe’s insane austerity measures, Japan’s tragedy, and China’s concerns about inflation.

    Meanwhile, other companies have been busy restocking inventories in the hope American consumers will be in a mood to buy. But that hope is coming to an end, as the reality dawns that American consumers can’t and won’t buy very much, given their shrinking home values, high debts, and job worries.

    Stock prices were also rising because of Wall Street’s certitude that it can make loads of money from the gullibility of millions of small investors. Here’s where the smoke and mirrors come in.

    Over the past year, the Street lured small investors back into the market on the smokey promises that the worst is over and stock prices are bound to rise. The lure became a self-fulfilling prophesy. As investors re-entered the market, they bid up stock prices. Hence, the mirror.

    Insiders on the Street are always the first to bail when they sense they’ve been overselling, as they started to do a few weeks ago. This gives them a second opportunity to make money off small investors — by selling short.

    The nation’s second-largest financial redistribution in history (the largest, on a percentage basis, occurred in 1929) came in 2007 and 2008 – from small investors and their pension funds to the Street’s savvy traders who shorted them. Now it’s been repeated, although on a smaller scale.

    And Washington? Completely clueless. Our representatives in the nation’s capital continue to obsess about future budget deficits and games of chicken over raising the debt ceiling — neither of which has anything at all to do with the stalled recovery and the carnage on the Street.

    Otherwise, the airwaves are filled with Weiner’s tweets, Gingrich’s implosion, and Palin’s emails. When times are tough we look for entertainment.

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