The 17,000 Dow Jones: Surging Towards a Financial Disaster

Tuesday, July 8, 2014
By Paul Martin

By Nick Beams
Global Research
July 07, 2014

The rise of Wall Street’s Dow Jones Industrial Average to an all-time high above 17,000 last week is another sign of the explosive contradictions building up within the American and global financial system.

Since hitting its low point of 6,547 on March 9, 2009 following the financial crash of September 2008, the Dow has climbed by more than 10,000 points, and is now over 250 percent what it was barely five years ago.

At the same time, following the official recession of December 2007 to June 2009, US gross domestic product has experienced its worst “recovery” of any comparable period since World War II, with output falling by almost 3 percent in the first quarter of this year. Investment in the real economy remains stagnant as corporations pile up cash rather than expand productive activity, and use the money to fund share buy-back operations, mergers and acquisitions and other, essentially parasitic, financial operations.

Internationally, the situation is no better or, in some cases, worse. Large segments of the economies of the advanced countries are either experiencing stagnation or outright recession. Output in the euro zone has yet to return to the levels of 2007.

According to calculations by the Bank for International Settlements (BIS), a consortium of the world’s central banks, the output of the major economies is around 8 percent below where it would have been had pre-2008 trends continued.

In the so-called “emerging markets,” once hailed as the saviours of the world economy, there is increasing nervousness over the state of financial markets amid fears that a major withdrawal of “hot money,” highly sensitive to any interest rate increases in the advanced economies, could precipitate another global financial crash.

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