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Why economy’s pains don’t stop market’s gains

Dear Mr. Berko: I am 63 and recently got laid off after 31 years with a Fortune 500 company.

Considering the economy here and overseas, why would stocks increase in price? We have a record national debt, and the Federal Reserve prints $85 billion of new money every month and gives it to the banks that won’t lend it to consumers, who are charged $49 to bounce a check.

These trillions enable Wall Street, investment bankers and hedge funds to make billions for themselves.

More than 20 percent of Americans live in poverty, unions push higher wages on state and corporate businesses and generous entitlement programs are forcing higher taxes on those who work.

Republicans are more interested in our bedroom practices than they are with economic problems, and Democrats increase entitlements and taxes rather than increase jobs.

Banks flout the laws, stealing hundreds of billions of dollars. Crooked stock trading is rampant, and the stock market is a rip-off for small investors.

Health and homeowners insurance rates skyrocket, and oil companies raise fuel costs by 20 cents in one week.

Our public schools are failures. Many states, including California and Illinois, are drowning in debt, and many municipal and corporate retirement plans can’t keep income promises they made.

Social Security and Medicare are bankrupt, but members of Congress, with a fantastic retirement and health care system, accept billions from lobbyists who guarantee them jobs after leaving office.

Unemployment hovers around 8 percent. Wages are lower than they were five years ago. The gap between wealthy and the poor gets bigger, and the middle class is disappearing.

Municipalities are reducing employment, and Citigroup is cutting 12,000 jobs this year. In 2012, Dell, Intel, Google, PepsiCo, Procter & Gamble, Best Buy, Hostess, Food Lion, Hewlett-Packard, American Airlines, IBM and Bank of America laid off 157,000 workers.

Grocery prices are much higher than the government’s inflation numbers, and friends of mine who owned 4 percent certificates of deposit two years ago are hurting because their interest incomes have crashed.

Today they’re forced to chase risky, high-yielding stocks and exchange-traded funds that will crash when the government stops stimulating the economy. Investors who bought long-term bonds will lose fortunes when interest rates rise, which may be soon.

I and other retirees in our mobile home community are concerned that our Social Security and Medicare benefits will be cut.

Europe and Japan, our biggest trading partners, are in the economic doldrums. Japan’s gross domestic product fell 3 percent in 2012.

Union demands have bankrupted Greece, and Italy, Portugal and Spain are next. And U.S. unions are taking the same path.

European unemployment is in double digits, with no solution in sight. American exports will crash because Europeans don’t have the wages to buy U.S. products, causing our unemployment to rise and corporate earnings to fall.

The Middle East is nuts; people like to kill one another. The governments there are unstable, and Iran wants to drop a nuclear bomb.

Then Congress kicks the can because it can’t get its act together to pass a simple budget.

Tell me, sir, how can stocks rise in the face of all of this? —SW, Cleveland


Dear SW: I receive similar letters every day.

Your four-pager, which I summarized, eloquently speaks the public’s mood.

The market is rising because Congress is dumping $85 billion of new money every month into the accounts of banks that would rather invest it than lend it.

Ben Bernanke, who believes that a rising stock market and low interest rates will create enough consumer confidence to stimulate the economy, is off his rocker. What happens when the stimulus stops?

Ben has no exit strategy, and many believe he’s putting the cart before the horse. But you may notice a gradual change in voter expectations as Washington promotes caring entitlement programs for the citizenry.

Because we can’t create jobs, the Fed keeps interest rates low to grow stock prices, which generate profits that provide a tax base to pay these bills. Most Americans must reduce their future goals and expectations because the resources won’t be there.

This is what we voted for.


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