The headlines scream “A nightmare on Wall Street. Dow plunges 635 points, sixth biggest drop in history” yet the World is buying U.S.Treasury Notes as if there was no tomorrow. Maybe for many there isn’t.
Wall Street Journal’s MarketWatch reported “…investors pulled funds out of stocks and most commodities and sought the liquidity and traditional safe-haven status of the U.S. debt market after the country’s credit rating was downgraded.”
The world trusts the U.S. to do the right thing. Eventually.
However, faith has been lost in the U.S. market to self-correct itself through capitalism alone. There is little trust in the money movers and shakers to focus on anything other than worshipping at the altar of profit but for profit’s sake alone.
Responsible, rational self-interest does not exist. The forces behind the debt deal were all about freeing the market so that it could operate on its own. In its own way. With minimal interference. Perhaps not even the people that mouth those words actually believe them … or perhaps fewer today than yesterday.
The recent really bad debt deal forces the U.S. government into a position where it cannot aid the market — through Keynesian interference if that makes you feel better — but the market on its own is a sell, sell, sell! It is overvalued, overhyped and overleveraged. A tax increase would have barely scratched the amount of cash and fortunes that have dissipated overnight and over the last 10 days.
Yes, we need to cut governmental expenses whereever and whenever we can. We have a Congress that actually has that as one of its prime powers — the authority of the purse. Yet our Congress are a bunch of shills across both ends of the spectrum. If you want it then you must pay for it. The Democratic tax-and-spend is absolutely no different than the Republican spend-and-ignore the credit card bills approach to financial management. We are now paying the price for both ways.
To those that wanted to starve the beast — you have succeeded. Irrationally. The forces of capitalism have been spooked. Now the laws of unintended consequences have visited us. Except we wanted this. Didn’t we? Yes! Merry Christmas!