"Experts" get away with saying almost any nonsense they like when it comes to talking about the stock market and the economy, but I think that we may have hit a new high today. A Times article today quotes Mark Cliffe, global head of financial markets research at ING Group in London, saying that the U.S. stock market has fallen 5-6 percent this year. The expert adds that if it falls another 5 percent, it could affect consumer spending and "‘Joe-Six' could start to cut back his stock portfolio." Okay, there could be a wealth effect from lower stock prices on consumption, but this usually takes some period of time. Furthermore, wasn't the purpose of supply-side tax cuts (as in President Bush's tax cuts) to increase saving? In other words, we are supposed to believe that less consumption is bad when it happens because the stock market falls, but good when it is due to a tax cut. (More savings MEANS less consumption.) But part 2 of this quote is the real fun -- Joe Six-Pack's stock portfolio? First, even in the era of 401(k)s only about half of the population hold any stock at all, even through their 401(k) accounts. The median stock ownership among the people who own stock is less than $30,000. So, what is the economic consequence of a large portion of the people who own $15-$30k of stock selling off a quarter or a third of their stock? As best I can tell, just about zero. Why does the NYT print such nonsense? Does the reporter think about what he is writing?
--Dean Baker
