I must be feeling arrogant to let this thought see the light of day...

As Stocks Slide, Investors Hope for Positive Earnings Reports
By JONATHAN FUERBRINGER

After last week's market plunge - when America's three main stock gauges fell more than 3 percent - Wall Street and unusually nervous individual investors are looking to the flood of earnings reports this week to see how optimistic corporate America is in its outlook for the economy.

Almost a third of the companies in the Standard & Poor's 500-stock index and almost half the 30 companies that make up the Dow Jones industrial average are to report earnings for the first three months of the year. But more importantly, many of them will comment on the financial quarters ahead and could either counter or reinforce the current pessimism about the economy.

This is important, but its importance isn't what most folks think it is. To explain what I'm talking about I first lift a little explanatory text from Economics Explained : Everything You Need to Know About How the Economy Works and Where It's Going (and there's never been a more accurately named book). This is from pages 84 and 85.

There are aspects of the savings and investing process that everyone does not know, and it is to these that we now turn...savings has two quite distinct meanings. The first of these is indeed putting money aside and not spending it. The second is letting go of or investing those resources.

...Meanwhile, however, we must also understand that saving is more than just a financial matter. It is also an action that frees labor and resources from the production of consumer goods and thereby makes them available for the production of other goods.

...Suppose, for example, that businessmen decided to double their investment spending in anticipation of a war. It is obvious that such an increase in the spending of the business or government sectors would send the price of labor and of other materials shooting upward, as business and government struggled to get their hands on the labor force and materials they needed. That would result in higher costs, and could start an inflationary scramble.

In fact, there is only one way in which a large increase in investment or government spending can possibly be undertaken without such a scramble: the resources and labor they need must be made available to them. One way in which this can be done is by taxing—simply taking away spending power from households and giving it to the government. But industry has no taxing power [P6: yet...thank God...]. For businesses, the only way that resources can be made available on a large scale is for them to be voluntarily relinquished by the household sector. We call that process of voluntary relinquishment savings.

Thus the really constructive aspect of savings is not so much its financial side, which merely creates a gap in spending, but its "real" side...

This leads to the last vital link in the chain. The released resources must now be taken up and put to use by the business sector. If they are not put to use, the shortfall in demand created by the financial act of saving will simply hurt consumer demand, without any compensation...

Yeah, that's a lot of verbiage. It was necessary to type up (manually, ugh...) to make sure you understand that when people talk of the economic wonders of increased savings that are talking about that aspect of savings that includes making capital investments, buying material or equipment that will produce.

Investing in the stock market, on the whole, doesn't qualify. Initial offerings qualify. Buying shares from some guy doesn't (the guy may subsequently do something with the money that qualifies, of course).

And I'm not dismissing the stock market. Again, it's important...but it's importance is not that commonly assumed. Knowing the fundamental theory and watching the rhetoric makes it obvious our economy is just as planned as any Communist state's economy ever was.

I think that's enough for today. And I think I need to post myself a reminder to pick up on this later.