In a meeting I moderated with 50 or 60 of the top financial minds in Los Angeles, we discussed this very topic last week. Someone in the room made a very significant observation that might well describe this phenomenon.

US corporations have outsourced a huge amount of their manufacturing capabilities to other parts of the world. We therefore produce very little in the United States and unfortunately use very little labor as a result. In addition, US companies are increasingly selling their goods and services to consumers in other parts of the world. The United States represents only a tiny fraction of all potential consumers worldwide, and while we are relatively wealthy, there are plenty of people with plenty of money to buy many products from our corporations, which helps keep them in good standing.

So when you add in the fact that US companies earn revenue from international locations without helping the US economy through the use of their labor, it may partially explain why the stock market is rising.

Translation: American investors are making money, but ordinary people don’t feel the benefit at all because so many jobs have been outsourced.

It’s funny how it works and it’s a sad commentary on an American economy that has worked for a long time. We are all going to have to figure out how to make our economy work for us in a new and different way.

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