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

Hells Angels invited to rally by anti-SOGI organizer

The Culture Guard group has helped Hells Angels in the past, said its executive director.

HOCKEY: Players have all been touched in some way by cause

Langley charity hockey team chooses to donate to BC Children’s Hospital.

Cloverdale Rodeo foundation gala dinner to support local youth

Second-annual gala will take place at Krause Berry Farms

UPDATED: Fatal crash shuts down part of Langley’s 264th Street

One dead in crash involving a motorcycle, police say.

WHAT’S IN STORE: Langley charities and businesses join forces for good

People are encouraged to rev a few motorcycle engines this week, in aid of Big Brothers.

Police release criminal profile of suspect in Burnaby teen’s murder

Marrisa Shen was found dead in a Burnaby park last summer

EDITORIAL: Speaking out for sexual identities

Both sides of SOGI debate for B.C. schools show signs of bravery, but not all are heroic

B.C. hockey team to retire Humboldt Bronco victim’s number

BCHL’s Surrey Eagles to retire Jaxon Joseph’s No. 10 in light of bus tragedy

OUR VIEW: Vaisakhi cleanup puts pot partiers to shame

Half a million people attend parade in Surrey and in its wake, things are cleaned up within 10 hours

B.C. bill aims to keep Indigenous kids in communities, out of care

Changes to Child, Family and Community Service Act could connect MCFD, Indigenous communities

Condo contract rules target B.C. property flippers

Regulations to prevent property transfer tax evasion

Turning vehicles into deadly weapons is easy and cheap, expert says

Not all recent vehicle attacks have been linked to terror groups, says Candyce Kelshall

Canada not properly managing fish farms, environment commissioner says

Better standards are in place in British Columbia, meaning less fish have escaped, reports show

B.C. to give municipalities final say over rental zoning

City halls will be required to provide housing needs assessment

Most Read