End of the Koons economy?

Today’s economic news reflects the new looking-glass world we inhabit.

The Dow Jones sank a hefty 300 points on news that the economy may be rebounding at long last as reflected in the solid 4 percent quarterly growth rate increase and good job numbers.

Huh? Why would the supposed principal barometer of the nation’s material well-being move inversely to a strong economy? Shouldn’t indications of proper growth and job creation make the stocks of national companies worth more?

Tut, tut, innocent ones. This is the brave new financier world in which gains from assets are not based on anything real but rather on the possibilities of exploiting mathematical games and executing clever trades with the piles of cheap cash provided by the state.

And therein lies the motive for Wall Street’s sudden egg. It appears that the Federal Reserve may begin to turn off the tap on the oceans of liquidity that it has injected into world banks hoping to goose production by providing a wall of capital. The alternative, goosing production by stimulating demand via government deficits, is Not Done.

The result has been a run-up in assets to renewed bubble proportions, and it was just a matter of time before the inevitable pull of gravity kicked in. Today’s market debacle may or may not be the turning point, but according to Isaac Newton, is has to come eventually.

Reuters summarized the state of our new Jeff Koons economy—characterized by shiny baubles of sparklingly useless kitsch fakery produced with consummate skill. It reported thusly:

I

n after hours trade, shares of LinkedIn (LNKD.N) jumped 8.9 percent to $196.70 when the corporate networking site reported a 47 percent increase in quarterly revenue and forecast better-than-expected adjusted profit and revenue in the current quarter.
During the regular session, Kraft Foods Group (KRFT.O) shares fell 6.4 percent to $53.59. The stock was the biggest percentage decliner on the Nasdaq after Kraft late on Wednesday reported a scant rise in quarterly revenue.

And there you have it, our economic life in a nutshell: huge values accumulated by a magic Internet vehicle while a company that actually produces something (food, by some definitions), slumps.

No doubt the savvy investors are hoping that the economy returns to its prior state of crippled stagnation so that the Dow can restart its vertiginous, post-meltdown climb.