The Dow went up more than 70 points yesterday. The higher it goes, the more dangerous it becomes.

What’s the matter with this downturn? Shouldn’t it lower stock prices? Shouldn’t it empty tables at fancy restaurants? Shouldn’t it close down some of these luxury shops and make it easy to upgrade to business class?

Nah… The Great Correction is a failure. At least so far. It’s correcting only the people at the bottom.

Last week, we went shopping for a birthday present. We went around Bethesda, to Bloomingdales…to Saks…even to Tiffany’s. In one shoe store there were five middle-aged clerks, ready to help us. How could there be enough profit in a pair of shoes to support so many clerks? Then we found out…when Elizabeth bought a pair. Leaving the store, she picked up the wrong bag… The clerk called her. He offered to meet her to exchange bags. “Just look for me. I’ll be in my black Mercedes,” he said.

What? How can shoe clerks afford Mercedes?

Then, we went to Tiffany’s, where there were so many Asian customers, the clerks barely gave us the time of day.

Everywhere we went we found shockingly high prices – and people paying them.

Here in LA too…the numbers show typical families are poorer – thanks largely to falling house prices. But there are still many people at the top…with expensive cars…expensive habits…and the money to keep at it. And despite all the talk of downsizing chic – we don’t see much evidence of it.

At the upper income levels, there doesn’t seem to be much correction happening. And why should there be? The feds give them money.

Stocks have recovered most of their losses. Bonds – which should be worthless by now – still trade hands at par. Corporate profits are at record levels.

Where’s all this money coming from? You guessed it, the feds.

But pity the poor lumps at the bottom. The official unemployment rate has gone down…but most of the improvement in the numbers comes from dropping people off the list of those who are looking for work.

So, what happened to those who didn’t find jobs? They’re getting food-stamps (42 million of them at last count). Or, they’re living hand to mouth.

Many of them have now been out of work for so long they’ll probably never work seriously again.

In this case, the leftists are right. The feds have re-flated the rich folks’ bubble…largely at the expense of the poor. Even Fed governor Thomas Hoenig says so. From Bloomberg:

The Federal Reserve’s “highly accommodative” monetary policy is partly to blame for rapidly increasing global commodity prices, said Kansas City Fed President Thomas Hoenig, who called on colleagues to raise the benchmark interest rate toward 1 percent soon.

“Once again, there are signs that the world is building new economic imbalances and inflationary impulses,” Hoenig, the central bank’s longest-serving policy maker and lone dissenter at meetings last year, said in a speech today in London. “The longer policy remains as it is, the greater the likelihood these pressures will build and ultimately undermine world growth.”

Those “inflationary impulses” are making it hard for the middle classes to make ends meet.

Hershey’s is raising prices 10%. At least it’s being honest about it. A New York Times article tells us that many consumer brands are passing along “stealth inflation” by reducing sizes or lowering quality.

You go to the grocery story. You’re given opportunities to buy new “healthy” items – smaller, and more expensive. Or they are “green” – which makes you think that maybe they are better for the environment in some way. What they are for sure is more expensive.

Not that we blame the companies. They’re caught in a squeeze too. The Fed has driven up prices for their raw materials. Sugar, wheat, cotton, oil – almost all their costs are higher.

The big exception is labor. The cost of employing people has barely budged. Too bad. Because customers are also employees. If they don’t earn more in wages, how can they keep up with the inflationary cost increases?

Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.