Why The Stock Market Dropped

There are going to be complicated understandings in the news about why the Stock Market had such a major drop.  They include a poor economy in the U.S. (but we already had one before this), a debt crisis in Europe (ditto, though maybe it got a little worse), or some combination of the two. Then there are the “daily horoscope” explanations of why — “the market crashed because sparrows flew from Wisconsin, thus ruining the Brazilian Rainforest yesterday”.

At least as understandable as any one of them is this: The economy isn’t stable because our government isn’t. After months of wrangling and a near-stoppage re: the debt ceiling, we thought for a minute that it would be stable, but now we know that it’s not.  Immediately after the last round of arguing and a near-default, where everyone took a sigh of relief, the Repo-blicans proved that they were still not going to discuss things. The “Super-Committee” that’s supposed to put forth a budget plan by November will be composed of Republicans who will stick to the same “No Tax Increases!” plan that worked so well last time. John Boehner has said that they won’t even put somebody on the committee who will raise taxes on the richest of the rich.  That leaves a Super-Committee-Who-Won’t-Agree-On-Anything. The Dems will want to raise taxes to increase revenue and the Repos will refuse. Even if they come to another “compromise” like the last one, they will battle with their bravado until the last minute once again. And most of America (60% according to the polls I see) want a tax increase on the richest. That means that Dems will look dumb if they back down and Republicans think will look “weak” if they do. This is not the way to a compromise. If Dems harden their stance and Repos continue to stand their ground, by November, we will have … nothing.

Once again, the economy could go into some sort of spin because both parties won’t move at all, leaving a government that gets nothing done.  Even corporations need to know which way the wind blows. How can you predict earnings if you don’t know what the laws governing your item will be? How can you make plans not knowing if the economy looks like the Tea Party wants it or the Supposed Socialists want it? You can’t.  How are people going to have confidence in the economy if all they hear about is stagnation in the Capitol? If they don’t have confidence that their leaders can do anything, or that the economy will re-focus on jobs and such,  why would they buy anything?

It’s a no-win situation because our politicians want it to be a no-win situation for their “opponents”. “No” and “No” don’t add up to “Yes”. It doesn’t work that way.

So what to do? Write, call, yell at, protest, any politician who gets on the Committee  and says in advance “I want a no-compromise compromise”.  Politicians used to be “Statesmen” and “Stateswomen” who knew the art of the deal, how to compromise, and understood that there’s a reason we have Branches of Government and two houses of Congress — because we need everyone’s input. I don’t remember anything in the Constitution saying anything about parties, though. Those we may not need. The woman whose view of life I most value, Virginia Satir, says that “if you can’t come up with at least three options, you’re not being creative enough”. We need States-people who are creative and can get things done, not partisans who are nay-sayers and don’t.

For people who want the economy to be stable, and investment, jobs, and profits to happen, the Repos are doing everything they can to make sure it won’t happen if it’s not their way. Help them find somebody who can flex. Tell them to avoid anyone who can’t or won’t.

Just a thought.

 

Peace,

 

John

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3 thoughts on “Why The Stock Market Dropped

  1. John, what happened today had nothing to do with the “debt ceiling” situation or any partisan bickering over the past month. I’ve been saying for a long time that this would happen, and it wasn’t by accident. Taxation can only HURT an economy (never help) – Economics 101. Because government spending is SO high, now there is no way to increase taxes high enough to be able to pay for the country’s spending and debt – essentially our economy is doomed because there can be no way out.

    It’s too bad, though, because democrats STILL refuse to make any attempt at understanding economics- they just try to buy votes by promising more spending, despite the basic laws of economics that demonstrate how awful this is. Now we’re paying the price. At least republicans are trying to bring financial responsibility back to the government, but as soon as they do Obama does the “we’ll just have to stop paying the social security recipients” card to demonize the republicans. Is “social security” (an oxymoron, BTW) good for an economy? NO. But it sure does get votes! If I was so dishonest as to promise free money to anyone who would vote for me, I’d get elected too. But I guess I’m too moral and smart.

    Thank goodness we have some republicans who are trying to knock some sense into the government. Democrats have screwed this place up good. Too bad, this used to be such a great country.

    Just a reminder, I’m not a republican. I’m a Libertarian. Republicans have plenty of problems too, but at least they understand economics. It just so happens that today’s topic is all about the economy.

    • Bob: I’m just curious. How do you explain FDR’s plan working to pull us out of the depression?
      Also, it’s not “free money” — It’s money people had taken out of their paychecks for years. He wasn’t giving them “special money”, he was saying “the government should live up to its promises”. That includes paying the debt that our government ran with a combination of wars (we always find the money for them. What portion of the debt are they?) and cutting taxes on people who already have enough.

      Finally, since 1980 — thirty years — we’ve had 11 years of Democratic presidents. 2 terms of Clinton and 3 years of Obama. If someone other than democrats has been running the country, why do they get the blame? Especially since one of those democrats left office with a huge surplus?

      I’m sorry, the reality of my experience and understanding of history doesn’t match with the suppositions of Economics 101. We’ll have to agree to disagree. Please do not misunderstand me. I’d like a balanced budget and I’d like our people to get their needs met. Being uneducated re: this stuff, a balanced budget makes sense to me. Borrowing money (from whom?) doesn’t — especially to have a war that doesn’t really make us safer and deprives a generation of families of their parents. I think that debate is a good thing — and I think we need States-people that can see both sides of an issue. I guess the topic of the day was politics for me.

      One last thing: Is there a Libertarian government anywhere in the world? How does it pay for roads and schooling and such? I just don’t know how or where that works. Please explain.

      Thanks.

      Peace,

      John

      • Readers: I’m not the only one who thinks this way… From today’s AP News: Standard and Poor lowered the US’ credit rating today re: why ….”In its statement, S&P said that it had changed its view “of the difficulties of bridging the gulf between the political parties” over a credible deficit reduction plan. S&P said it was now “pessimistic about the capacity of Congress and the administration to be able to leverage their agreement this week into a broader fiscal consolidation plan that stabilizes the government’s debt dynamics anytime soon.” (highlighting mine).

        Also, from Robert Reich yesterday — “John Boehner said Tuesday the Republicans got “90 percent of what we wanted” from the budget deal. So presumably he and his colleagues are willing to take responsibility for some 450 points of today’s mammoth 513-point drop in the Dow Jones Industrial Average. I’m being a bit facetious – but only a bit. It’s always dangerous to read too much into one day’s move in the stock market. Yet the stock sell-off – not just today’s, but that of the last days – cannot be easily dismissed. It marks Wall Street’s largest losing streak since 2008…..Wall Street investors aren’t ideologues. They don’t obsess about budget deficits ten years from now, or the size of the government. One day doesn’t make a trend, but a giant sell-off like this is motivated by hard, cold realities. Here are the two hard, cold realities investors are most worried about: First, the economy looks like it’s dead in the water. The Commerce Department reports almost no growth in the first half of the year. And job growth is just about at a standstill. Far fewer jobs were generated in May and June than necessary just to keep up with the growth in the potential labor force – meaning the employment picture is actually worsening. Investors fear tomorrow’s (Friday’s) jobs report for July will show more of the same. Secondly, investors now know the federal government’s hands are tied. The original stimulus is over; the Fed’s “quantitative easing” is over.
        This week’s deal over the debt ceiling cinches it. The market is now on its own – without enough rocket power get out of the continuing gravitational pull of the Great Recession.”

        The full articles can be found at <a "http://finance.yahoo.com/news/SampP-downgrades-US-credit-apf-2107320979.html and http://www.readersupportednews.org/opinion2/279-82/6903-the-republicans-double-dip

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