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August 09, 2011

DOOM gets in your eyes

DOOOOM

Yestday, the Dow sank like a holed submarine, dropping a terrifying 635 points and taking most world markets along with it. David Ranson over at Forbes tries to explain why the stock market tanked.

Why this crisis is different from 2008.

Starting from the most obvious: The two crises had completely different origins.

The older one spread from the bottom up. It began among over-optimistic home buyers, rose through the Wall Street securitization machine, with more than a little help from credit-rating firms, and ended up infecting the global economy. It was the financial sector's breakdown that caused the recession.

The current predicament, by contrast, is a top-down affair. Governments around the world, unable to stimulate their economies and get their houses in order, have gradually lost the trust of the business and financial communities.

That, in turn, has caused a sharp reduction in private sector spending and investing, causing a vicious circle that leads to high unemployment and sluggish growth. Markets and banks, in this case, are victims, not perpetrators.

Perma-bull Larry Kudlow, always able to see chicken salad in chicken shit, advises everyone not to panic.

King Putt, never one to lose an opportunity to make a bad situation worse, came out to exercise his voice some more. The markets, which had been showing signs of rallying prior to the speech, accelerated their crash-dive. Some cynics with shriveled black raisins for hearts might suggest that this is a massive "no confidence" move in our esteemed God Emperor.

London is being rocked by riots as I write this. This counts as financial news because London is a major financial hub, and this just adds to the uncertainty that many investors are feeling right now. Also, the UK is in the middle of a major austerity push, and there is a lot of free-floating anger and anxiety in Britain (and elsewhere) about what the future may hold. The "causes" of this riot almost don't matter; the fuel for this riot is the same fear and atavism that many people in the developed world are feeling. (This is how widespread the rioting is. It's not just some small, localized disturbance.)

Thanks to the pension crisis, the public sector should prepare for a "lost decade" of pay increases.

Update 1: Bret Stephens on the unparalleled genius of our God Emperor - "I don't buy it. I just think the president isn't very bright."


----------------

You have fallen into my clever vertical-twig trap! Prepare to be destroyed!

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posted by Monty at 09:51 AM

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