The Low Stock Market: A Gift to Young Workers

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I'm waiting to see a reporter write this story, but I'm not holding my breath. The basic point is simple, given a path of future profits, if the stock market is high, it will cost our children and grandchildren much more money to buy a certain share of these future profits than if the market is low. In other words, if the S&P is at 1000, then our children will get much higher returns on their savings than if the S&P is 2000. (There is very little feedback the other way -- stock prices have little impact on profit growth-- so the assumption that the growth path of profits is independent of stock prices is probably a reasonable one.) So, the young people out there should be celebrating the plunge in the stock market, except for the relatively small group who were anticipating inheritances from their parents. You can't please everyone.

--Dean Baker

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