August 8, 2011 - 11:35 am
On the basis of its market reaction, Wall Street clearly rejected President Obama’s first comments on Standard and Poor’s historic downgrade of U.S. sovereign debt from AAA to AA+. During his address the Dow drop accelerated and dropped below 11,000.
When the president was scheduled to speak at 1:00 pm, the Dow was down 300 points. By the end of his speech it had dropped 150 points to 450. Twenty minutes after the speech the Dow dropped declined by 600 points.
The Nasdaq also dropped from the beginning of his speech from negative 98 to 156.
So far the market response is a massive vote of no confidence of the president’s remarks.
The world is waking up to the fact that Obama and his Administration are in over their heads, and the way they have blamed this on the Tea Party and any other convenient whipping boy rather than take responsibility is all the confirmation that the markets need that nothing constructive will be done. The first step toward recovery is to admit you have a problem. Obama & Co. haven’t done that yet, and the world is tired of waiting.
I really don’t believe anymore that they are in over their heads. In Barry’s “impose my vision at all costs” mentality, economic chaos and wealth destruction are his means to an end.
To accelerate citizens’ dependence on government requires other options like financial independence to be undermined.
Barry doesn’t need to admit to a problem — he just needs to stay on his course and take us with him — by any means necessary.
I did choose a more charitable interpretation, partly because your alternative is just too depressing for me. Which doesn’t mean you’re not correct. Certainly the thought has crossed my mind.
Personally, I think he just doesn’t give a s$@t. He wanted to be President by any means necessary, and the leftists played to his background so he rode their ideology to the highest office in the land. I think he has no beliefs, except that he should win the big prize. And he did. Honestly, I think if this Presidency gig turns out to be too much trouble, he’ll be glad to turn it over in a couple of years.
On Wall Street, right now, there is blood all over the floor. The Dow is trading below 11,000. Over 1200 stocks have hit 52 week lows today. Declines are out pacing advances by 60 to 1. Every major index is down 4%, 5%, 6%, 7% on the day. Crude is toying with $80.00 a barrel (i.e., way down).
The markets are certain that we’re already in a new global recession. Moreover, they see no political leadership either abroad or here in the US capable of responding to it in a substantive, positive, forceful fashion.
“Markets go up and down.” Yes, Mr. President, that’s a truism. But tell me when do you expect an up? Any time soon? We could really use one! Now!
If I gave a fifth of Glenlivet and a box ‘O darts to a chimpanzee and had him take a swig of whiskey before throwing each dart at a wall with possible decisions pasted on it, the monkey would devise a better economic strategy than the current president.
Really y’all, does anyone believe this economy is the result of the left’s incompetence?
Stocks down, oil down (gold up but that’s a different story) but US Treasuries are up! Check out the 13 week T-bill right now. It is at 1 basis point. I.E. invest $10,000 today and in 3 months you get it all back plus a quarter! This is the lowest return I have ever seen and this corresponds to massive amounts of investor capital flooding into the US bond market. So, T-bills/notes/bonds are still considered “safe” in a turbulent market even when the turbulence is because of said instruments no longer being so “safe”. Can someone explain this Whiskey Tango… insanity!?
I believe I did in comment #3. As difficult as it is to swallow, that appears to be the case.
An AA+ US is still less risky than an equity.
Seriously, the “flight to safety” has been to US Treas with short maturities, while the downgrade was for long-term outlook. The market is better, in effect, that the dummies are screwing up the future more than the present.
I’m clearly not an economics expert. I understand the subject about as well as I understand string theory. Pardon me for asking a couple of stupid questions.
First, since we’re supposed to be small-government conservatives, why are we expecting the government to solve all of our economic problems? Why do we insist that Obama have “a plan” to make the markets behave themselves? Despite our belief in free markets, we still cheer the President and Congress when the economy is doing well and criticize them when it’s doing poorly. Isn’t that more or less admitting that we already live under a socialist system in which the government controls a “planned” economy? Is there an alternative?
Second, if terrible things happen when the stock market takes a plunge, then why do participants in the market engage in mass sell-offs? A mass sell-off initiated the Great Depression. Isn’t there a point at which “the market” can say to itself “I’d like to dump all these stocks, but doing so would cause an economic collapse so I’ll make a sacrifice and hold off for now?” It seems like short-term self-interest trumps long-term economic health. Stock traders get a whiff of trouble, and with all the forethought of a herd of spooked buffalo, they stampede straight over a cliff. Is anybody in charge of this process? Anyone with a functioning brain, I mean? The market is made up of thinking people. Why do we treat it as if it’s as unpredictable and unmanageable as the weather?
OK, ignorant Q&A ended.
You ask some reasonable questions and I’ll attempt to provide reasonable answers.
On your first question, we have to realize that the government can’t actually create private sector jobs because first, they have to take money out of the economy before giving it to favored companies. The result is a net loss of jobs. However, the government can sure destroy private job creation by tax and regulatory policy. Last week, I read that the government had implemented over 500 new regulations just in the month of July and the compliance costs of those regulations would be billions of dollars. That’s added on top of the tens of thousands of existing regulations. A plan for getting out of this mess could involve things like getting the government off of the necks of businesses by straightening out the convolute and corrupt tax code and reducing the regulatory burden. Liberals think that raising tax rates will automatically increase revenue but history proves this isn’t the case. For over the past 50 years, tax revenues have averaged about 18% of GDP regardless of the top marginal tax rates. You increase the tax rates and people change their behavior. Who knew? So, if you really need to raise additional revenues, you should do the things that grow the economy rather than Obama’s “spread the wealth around” approach. A plan could also address how to get government spending under control. The Democrats keep screaming about needing more revenue but if we don’t address the growth in government spending, especially in “entitlement programs” but also across the entire budget, no amount of additional revenues will address the cronic debt problems.
Second, about the market. The market is made up not only of large institutions but also of millions of individuals. Everyone is acting in their own interests but not always rationally. If people think the price is going down and want to preserve any gains they might’ve realized (or prevent additional losses), they’re likely to sell when things look bad. When lots of people do the same thing at the same time, you get days like today. Even if a significant percentage of the people decide they aren’t going to panic, if enough of them do so, the prices will go down.
There is also computerized trading employed by large outfits that can drive large swings in the market by dumping vast number of shares all at once. The programs are designed to maximize profits for their companies (or minimize losses) but they can distort the market pretty radically.
Bugs…I noted that around here folks all to aften provide self serving interpretations of facts. For example, something repeated often here:
["tax revenues have averaged about 18% of GDP regardless of the top marginal tax rates."]
For individual vs. corporate tax revenue as share of GDP review the legitimate data from the below link….first column:
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?DocID=205&Topic2id=20&Topic3id=21
Now, as to the comments of government employee vs. private sector employees and their economic impact.
First, the private sector economy, even in the best of times…. ‘cannot’…. employee all the nations eligible labor pool…generally around the 4.5% range is unemployed with productive sustainable for all demand. Now, lets not mess with numbers but mention all the government employees. Why do we want to mention the government employees? Because, if they weren’t working for the government we would have to ADD them to that 4.5% number up above….again, in the best of times.
Okay, now lets consider any possible ‘benefit’ vs. ‘liability’ to the nations economy. In the private sector, for ever ‘spendable dollar’ earned as an employee that dollar recirculates in the economy approximately seven (7) times paying a lot of taxes along the way in each circulation per FY. pretty good, eh? In the public sector, for every ‘spendable dollar’ earned as an employee, that dollar circulates approximately seven (7) times in the economy paying a lot of taxes along the way in each circulation per FY. Pretty good, eh? Another possible benefit that may be considered is, that since the public sector employee generally makes more income than does the private sector employees, it’s reasonable to conclude they may spend more dollars into the economy. Did I mention, they also pay federal income taxes on those private sector dollars they get payed with?
So what might be the economic liability of a public sector employee vs. a private sector employee? None? Well almost! For every dollar taken from the private sector to pay for the public employee, it goes right back into the private sector’s circulating economy….except for retirement benefits…..which in fact, is invested in the private sector’s investment vehicles.
By the way, food stamps and unemployement dollars do the same things in terms of recirculating in the nations economy.
But, back to those evil, lazy, no good neighbors who are public employees. Lets agree with those advocates who want to end public employees by the scores and add them to that best of times 4.5% unemployed or to todays 9.1% unemployed. That is, after all, the perfect solution to fixing the nations unemployment and above all fixing the private sector’s economy problems. oooops! I almost forgot! It also fixes the nations shortage of tax revenue from working folks and government spending and the nations debt. Yes indeed!
All this said, in a ‘perfect’ world, the advocates would be right and all Americans would be working in the private sector and we’d be importing folks from New Guinea to work in the few government jobs.
Perhaps, as part of an austerity package, the House should put forward the idea that any president who was in office when the US has its credit rating decreased loses all their post-presidential benefits EXCEPT Secret Service protection.
We exited the big boys stock and bond markets in Dec ’99 when the DOW IND was at 10,997 or there abouts. Since then, it has gone up and down from a baseline of 7,5-600 with both parties in the office of the President. The problem isn’t with a partiuclar president or political party. The problem is with an absurd, arbitarily inflated stock market that can’t be sustained.
He keeps repeating his summation of the problem without offering any solutions. http://bit.ly/nNRbBV