Painful Truth: Dow Jones tumble far from all bad

Is it worrying that the Dow plunged last week? Or is it (kinda) good news?

W hen someone is reducing something to a soundbite, especially something as complex as the economy, don’t trust them.

This week, a lot of people are commenting on the massive plunge in the Dow Jones Industrial Index.

Why did the bottom fall out?

The sound bite answer is simple: investors fear rising interest rates.

Like a curious four-year-old, you can keep questioning each answer.

Why are interest rates rising?

Because inflation is rising. The cost of goods and services is going up at a faster rate than in some time.

Why is inflation rising?

A number of reasons – but one of them is low unemployment. In both the U.S. and Canada, unemployment is at historic lows. In the U.S., it hasn’t been this low in 17 years, while in Canada, it was around this low just before the last recession. Before that? You’d have to go back to the mid-1970s to find a lower unemployment rate.

Why does low unemployment cause inflation?

Because when there’s low unemployment, bosses have to compete for workers. And after a year or two of whining about how they can’t hire anyone, they’ve started to open their wallets. Wages are rising.

You can easily run this chain of consequences the other direction. Workers get paid more, so they have more to spend, so inflation increases, so interest rates are likely to go up, so investors get spooked.

You’ll notice that simply saying “interest rates” leaves out the important factor that the cause of the plunging Dow is actually something that is good for working people.

Yes, it’s more complicated than that. Yes, lots of inflation is bad for everybody. But the next time someone tries to sell you on the idea that a dip in the stock market is a bad sign, ask yourself if you’re getting the whole story.

The stock markets are not the only indicator of health for our economy. Never, ever trust anyone who tries to sell you on that idea.

Sometimes, what’s bad for the Dow is good for everyone else.

Just Posted

White stuff coats Langley in heaviest snowfall of the season

Langley residents have a day of snow to enjoy before the rain starts again.

Upcycling: possibilities endless for Langley artists using recovered items

Past winner enjoys taking garbage, and not recycling but upcycling it into something better.

Cloverdale’s Coldest Night of the Walk event breaks fundraising goal, raises more than $66,000

Hundreds take to the streets of downtown Cloverdale to raise funds, awareness for homelessness

Walnut Grove liquor store move turned down by council

For the second time since December, council has voted against the plan.

UPDATE: At least two hospitalized after plane leaves runway at Abbotsford Airport

Incident occurred around noon on Friday; Transport Canada investigating

President praises nearly 1,800 volunteers at B.C. Games

Ashley Wadhwani sits down with the Kamloops 2018 B.C. Winter Games President Niki Remesz

OLYMPIC ROUNDUP: Canadians all smiles after record medal haul

Team Canada is taking home a record 29 medals from Pyeongchang – 11 gold, eight silver, 10 bronze

‘All of us should be ashamed’: Calls for change after jury finds Raymond Cormier not guilty

A jury acquitted Raymond Cormier of second-degree murder of Tina Fontaine after 11 hour deliberation

B.C. girl hopes DNA drive will help her find birth parents in China

Isabelle Smit, 10, is one of 20 international adoptees from Chongqing looking for DNA samples

That’s a wrap: Day 2 of B.C. Games ends with multiple ties in gold, bronze

Vancouver-Coastal Zone 5 continues to lead, so far earning 25 gold, 32 silver and 25 bronze

The way government learn someone has died is getting a digital overhaul

Governments in Canada turned to private consultants 2 years ago to offer blueprint

Bobsleigh team misses Olympic medal finish

Canadian team finishes four-man event 0.84 seconds behind first place, 0.31 seconds from podium

B.C. Games: Athletes talk Team Canada at PyeongChang 2018

From Andi Naudie to Evan McEachran there’s an Olympian for every athlete to look up to

Snowboarders sliding into fresh territory at B.C. Games

Athletes hit the slopes for first appearance as an event at the B.C. Winter Games in Kamloops

Most Read