The economy has had one of the weakest recoveries is history as a result of higher taxes, higher regulations and an attitude and policy generally unfriendly to job creation and investment risk.  This comes after years of increased intrusion into the market economy but the large changes such as Obama Care have sharply added to the cumulative effect of regulations and laws.  This is most visible in the data on the record low number of business startups.

While their fiscal policy has stunted new business and job creation, they have tried to stimulate with government spending and cheap money.  Government spending has favored political cronyism.  Solyndra’s backers made money and the government lost its investments.

The labor market is weak as measured by the employment rate and even more so as measured by the percent of prime age workers who are active in the workforce.

The combination of cheap money and stagnant wages, however, has helped the larger public companies and stock prices have been up sharply.  Stocks also remain high because of the dearth of quality alternative investments.  With low interest rates long term bonds are very risky and pay very little interest.  Many stocks pay generous dividends and provide much better upside potential.  Housing and real estate are still weak and gold and commodities are volatile, pay no income and come with substantial risk.

Capital investment in a small company is much riskier and much less liquid than buying shares of a proven publicly traded company.  This may be great for the investor but the lack of investment in small businesses is bad for job growth.  Furthermore the larger company is better able to borrow money at competitive rates than a smaller business and one can thus leverage themselves much more effectively by buying shares in a company with a growing market and with borrowing power.  The ability to sell with maximum speed and minimum costs carries a great comparative value.

Since stocks are owned by the wealthier the net effect of the government’s fiscal and monetary policy is the widening of income inequality.  This may not be the intention but it is clearly the result and this result is easy to explain and predict from the circumstances created by policy.

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