Melissa Harris-Perry | March 10, 2013
>>> this morning, my question. what can we learn from harper high in chicago? plus, detroit. the city where democracy may be dying. tired of all the good races? first, bring it down a little bit. it's all irrational exuberance about the dow . good morning, i'm melissa harris-perry. hear that? on friday, the closing bell seemed to have a special ring to it. because the dow jones industrial average jumped up 67.6 points to 14,397. that was the sixth straight daily gain, a new record high, an all-time record high. it was the highest number the dough's ever been in 116 years and the standard and poor index added seven points landing 1% shy of its october 2007 all-time high. the nasdaq ended 12 points , $10 trillion has been restored to the u.s. equities. it took the market 65 months to do it. woo-hoo. what the what? i think we need this guy to help us out.
>> how do we know when irrational exuberance has unduly escalated? it then becomes subject to unexpected and prolonged contractions as they have in japan over the past decade. how do we factor that assessment into monetary policy ?
>> despite the fact it sounds as though greenspan never experienced irrational xub ransz exuberan exuberance, they are the two most important words. they held so much weight that they helped place the pin in the dot com bubble that burst in the 1990s . i'm thinking a different kind. all the numbers on wall street add up to just about zero for main street . the metric we are using to measure how fantastic it's doing, it's irrationally exuberant. it's not a new high. it doesn't account for inflation. if it did, it needs to rise 10% to hit a real all-time high. the dow isn't a generic indicator of the health of the entire economy or the markets in particular. it's a snapshot of how, well, 30 years or so, blue chip stocks from publicly owned companies are doing. that tells you those 30 corporations are doing well indeed with the help of massive layoffs and cost cutting over more than $2.3 trillion in fed stimulus that helped push investors back in stocks. the stocks are high because the fed kept the interest rates so low and moneybags investors want to put their money somewhere. the gains on the market became so unrelated, the vast majority of americans the term irrational exuberance means something to those of us not on wall street . you don't have to crunch the numbers to understand this index. the line you see here, shooting nearly straight up, it's corporate profits since 1970 . the other line, staying just about flat and starting to tip down, it's labors share of income. so, yes, we were happy to hear for 29 months in a row, the working economy added jobs, bringing unemployment down to 7.7%, the lowest since '07, but they haven't recovered the jobs lost to the recession. we are still living through the worst labor market recovery since world war ii . in part because all the corporate productivity isn't producing jobs. the official end of the recession in june, 2009 , payrolls remained flat while corporate spending on equipment and software shot up. yes, corporations are investing in machines, not man. this irrational exuberance is only for those not at the top. up there, up at the top is looking like a pretty a-okay recovery. take it from jaime diamond, he said casually last week to investors, this bank is antifragile. we actually benefit from downturns. he's not wrong. during just the first two years of the recovery between '09 and 2011 , the top 1% captured 120% of all income gains. that bottom 99% continued to lose ground. it might be irrational exuberance to think that is what recovery looks like. with me today, to set the world to right, msnbc policy analyst , ezra klein , editor of the blog for "the washington post ." carmen, a personal finance expert. organizer for the campaign, stephen, the ark tech for justice for campaign. lisa cook, michigan state university professor of economics and international relations and former member of president obama . are we or are we not in an economic recovery?
>> we are in a recovery, just not a good one. you did a great job in the open. we are not having a high in the stock market . the people irrationally exuberant are in the media.
>> it happens.
>> we are at a lower point than 2008 because of the lack of inflation in the dow and the s&p than in 2000 . it's a worse stock market than we had more than 10, 12, 13 years ago. the idea that we are irrationally exuberant about that is ridiculous. we are misreading numbers.
>> which we tend to do.
>> all the time.
>> we have difficulty in understanding how the economy ought to be measured.
>> the one good thing that happened is not that we passed a fake threshold, we gained more than 200 jobs in february. that is a big deal . if that keeps up, if congressmanages not to get in the way of that, it's something to be exuberant about. fake ticker tape is ridiculous.
>> that's news that unemployment has gone down. that's the big news. what's scary here is we are seeing a split. we can talk about the wealth cap. most of americans are not the investor class. they don't participate in the market. the markets where they have advantages, the housing market . it's gone up a little bit. not so much as the stock market . here is the thing --
>> i want to show, we have data on this.
>> as ezra was talking, we have difficult the visualizing this. when we look at who was invested in the stock market , 90% of the people with incomes of 100,000 or more, they have investment in the stock market . it declines. most of it is retirement. you see it is wealthier folks, higher income folks.
>> absolutely. over 50% of the capital gains that have been taken in the last couple years are actually that 1% or that .01% of folks. we can look at the great charts and graphs that show when the income of capital gains started being taxed so low at 15%, it coincides with the gap widening up. it used to be tax income. wealthy people, their income is not a paycheck, it's returns on the market.
>> the labor share of income, weekly wage growth is not growing, it's going down. this is a fragile recovery. we say 36 straight months of job growth . that's fantastic. this is uneven, not just on terms of who it benefits, but wage growth. it's income growth. in terms of wages, this is still something that is fragile. this is uneven, too, in terms of who is benefiting in what parts of the country. we'll talk about the jobs report --
>> i don't want to miss that. there were a cupping things i want to make sure we are clear about. capital gains are taxed at a lower rate than wages. when you earn these wages, you are paying out more in taxes.
>> mitt romney paid 9%.
>> it's the buffett rule.
>> it's not a chart, but everybody i talked to said the stock market is at a new high, what do you think?
>> the response was to burst into laughter. everybody said maybe it's good, but it sure isn't helping me.
>> what's bad is individual investors get in at the wrong time. you have folks that panicked and pulled their money out. now, they are going saying oh, look, it's going up.
>> it's worse than that. you have people who did it and had to spend it during the recession. one thing we lose in the so-called recovery is how much regular people are devastated. it's like the car accident. at the end, one person who caused the wreck, he's back in health and the other person lost a leg and arm saying this recovery is great.
>> if you had to eat your house or eat your retirement, lick wii dade it and eat it, as we come back, the loss of wealth is dramatic. we are looking at a country where nearly 30% of americans don't have savings accounts . 10% of americans don't have checking accounts . the idea that is operating at the same time of this so-called recovery.
>> if you see the costs, too, for most of americans . medical costs have gone up. the things you actually have to buy, whether it's the cell phone and internet. everything has gone up. you see this top class where everything has gone up so tremendously. what does that mean and what is it going to mean going forward?
>> part of what is happening in the stock market , it is going up. that is in part a commentary from the market. it is a belief the economy is going to grow. the economy is going to become real. we are not trapped in a slow growth normal. we will not see a real house in recovery.
>> a recovery for who?
>> when you look at the housing side of it.
>> stick here. sometimes it's the only truth that matters in the context of the economy. let's stay here. when we come back, i want to look at the chart you said is going viral. we'll talk about that when we