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Jan 4 / Jonathan

Wall Street’s Loss Can Be Our Gain

Dean Baker. The piece now has an addendum that explains Dean’s argument in a little more detail. Of course, this all depends on whether you “own large amounts of stock” or are “the rest of us”.

Wall Street’s Loss Can Be Our Gain

The lead article in the New Year’s Day edition of the Washington Post bemoaned the loss of $6.9 trillion in value in U.S. stock market last year. While those who own large amounts of stock have reason to shed tears, this may end being good news for the rest of us.

The loss of stock wealth means that stockholders have less claim to value of the country’s output. The U.S. economy can produce just as much in 2009 as it did in 2008 (in fact somewhat more, because of labor force and productivity growth). If stockholders can demand less because of the reduced value of their stock, then this leaves more for the rest of us. …

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