MISSOURI WATCH: DOW JONES JUMP: DOES OCT. 29, 1929, RING A BELL?

Does anyone know what's going on in today's economic world? What is happening on Wall Street and why has the Dow Jones reached such heights with so few paying attention? Has the U.S. succumbed to Merger Mania and if so, should somebody be worrying about it?

I ask the questions above not because I want to prove a point, nor do I offer them to introduce some new economic theory that has just been advanced by one of the political parties in Washington. I ask them because I'm truly confused, and I might add, just a trifle worried.

Let's forget for a moment the economic wars going on between the Democratic White House and the Republican Congress, for in truth, neither group does much more than react to the economic world outside. The rules of the game might be thinly listed by the federal government, but the real players, the ones who really count, are in the board rooms of American corporations, financial institutions and investment houses. The people who run these are the risk takers, the movers and shakers in big money and the ones who determine the fate of huge companies and sometimes even the fate of entire industries.

Even though the Dow has already gone past the 5,000 mark, the most far-reaching economic news in recent weeks is not the haranguing in Washington over taxes and the federal budget, but the largest ever wave of business mergers.

The wildest activity is in banking. Chemical Bank's merger with Chase Manhattan is a $10 billion deal, and thus becomes the largest single transaction in a string of mergers that through August totaled more than $35 billion. Surely some have asked where it will all lead and what it will mean. In talking recently to an official in the Federal Reserve Bank, he suggested two opposite possibilities. One is that we will revert to the medieval business structure where two or three firms would dominate each business sector. The second possibility, the official warned, is that the gigantic investment and debt structures will explode, going up in inflationary smoke.

Let's admit how incomprehensibly enormous are the transactions now going on. A $10 billion sale indeed. Where had Chemical Bank stashed that money? For that matter, can anyone visualize $10 billion in actual bills? Do you realize how long it would take to count, in dollar bills, Chemical Bank's $10 billion? In a round-the-clock, continuous effort: 320 years.

Truth is, few if any bills are delivered in today's business mergers. It exaggerates only a little to say that nothing more happens than to change a few words on pieces of commercial paper. Bank borrowing may be involved, but much of the "payment" is in stock shares.

The inference of the recent multitude of mergers and their multibillion-dollar transactions is that so long as big companies can exploit monetary (debt) institutions, there is no financial limit to how far the merger movement can go. The stopping point would be a business structure where a few super-giant firms play games with or against each other; and with or against the federal government as well. In fact, much of the contest would be for control of government.

Another way of looking at the incessant merging now going on is that it is a huge confidence game. Pyramided, to boot. The game can survive a surprisingly long time or it can crack up overnight. Any major credit default can trigger a 1929-style collapse. The problem with that collapse today is that only a small percentage of the living were old enough to comprehend, but certainly not understand, what had happened. Who today can imagine the shock experienced by our parents and grandparents who lived in thousands of small towns around America where every bank in the community failed, shuttered, closed down, leaving their depositors with nothing but the bills stuffed under their mattresses? That happened to my parents and hundreds of thousands of others 66 years ago.

What happens today if a heavily leveraged corporation or banking institution or a whole series of them go belly up? Chances are, the "too big to fail" rule will be applied, just as it was with some huge banks a few years ago. What that rule is invoked, the government keeps things afloat. The optimist says that will be the path chosen and the rescue will go ahead as scheduled. The pessimist says that a corporate failure the size of Chemical Bank would destroy whatever assets there are but take with it all the retirement systems, savings accounts and pension funds of the bank's customers.

Now for the final question: What kind of an incomprehensible and potentially unstable economic structure is being concocted?

~Jack Stapleton of Kennett is the editor of the Missouri News and Editorial Service.