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OK, markets are up. But whither the economy?

US stock markets ended sharply higher today, setting the stage for more arguments between bears and bulls.

Those with a negative view of the markets and the economy cited a Bloomberg report that said the Russell 2000 Index of small companies entered a bear market this week, falling at least 20 percent from its previous high. Small and medium suized enterprizes are generally regarded as one of the most important engines of the ecnomy, so that's not good news. The report also noted European shares were also in official bear territory, and said so far this week, $7.9 trillion in equity values has evaporated as markets all over the world have run wild.

Boosters countered, saying this is a heaven-sent buying opportunity. Warren Buffett told CNN Money he's a buyer. Plenty of others are, too - including corporate executives who re snapping up their own shares. Bloomberg reported sixty-six insiders at 50 companies bought shares between August 3 and August 9, the most since the five days ended March 9, 2009.

"Nobody knows a company better than the people running it," Shawn Price, who manages $2.4 billion at Navellier & Associates Inc. in Reno, Nevada, said in a telephone interview. "It's a positive sign that they are committing their personal capital."

This is the kind of good news that bolsters the case being presented by people who are bullish on the economy, and who point out that this week's market volatility does not reflect the strength of US companies.

"Balance sheets are very strong," Goldman Sachs' Abby Joseph Cohen told Bloomberg Surveillance. "This market volatility is happening at a time when U.S. companies, especially those in the S&P 500, are performing extremely well. Stocks, not just in the United States, but in some of the other major markets, are also priced at very low levels."

If corporate America is in good health, the same can't be said for the wider economy. Unemployment is still near record highs. The housing market is still suffering from foreclosures and an excess of inventory that has depressed prices and left many Americans either on the street or underwater on thier homes. Interest rates are so low that many retirees are being forced to live on a fraction of what they used to receive in interest income. A report out today from the National Foundation for Credit Counseling said a majority, or 64 percent, of Americans don't have enough cash on hand to handle a $1,000 emergency expense.

America's leaders operate on the assumption that if banks and companies are healthy, that good health will spread to the wider economy. That may have happened in the past, but it's not happening now. The reason corporate America is healthy, as Abby Cohen says, is because it is hoarding cash. Hoarding means not hiring, not paying higher wages, not lending. Not putting the money into the hands of the people that can make the economy grow, by spending.

**In the coming weeks, Marketplace will examine this disconnect between the markets and the economy, between Wall Street and Main Street, and work to help you understand how this situation came about, and what's being done about it. Follow our up-to-the-minute coverage of the markets and economy in our special section and blog Market Mayhem/Economic Standstill.****

About the author

Paddy Hirsch is a Senior Editor at Marketplace and the creator and host of the Marketplace Whiteboard. Follow Paddy on Twitter @paddyhirsch and on facebook at www.facebook.com/paddyhirsch101

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