Stock market crash?
- Thread starter darkbeaver
- Start date
Nor has there been planning to improve the quality or quantity of goods in most other segments of the economy. The emphasis is not on production but on profit, which could rise even if production declined. The stress is not on long-term planning but on immediate gratification, a stockbroker mentality, and rewards or punishment for playing with stock "bubbles". In fact, the rise and fall of stock "bubbles" are often unrelated to actual production.
This emphasis has also produced a US society with group but not national interests, where concern for the majority of the poor is ignored not just by the Republican right but by the liberal left. In fact, the attempt to change "affirmative action" preferential treatment based on race and gender to a policy based on low income is constantly rejected by the left as well as the right. The reason is simple: "affirmative action" benefits mostly middle-to-upper-class blacks and females; a change would benefit the poor and lower-middle classes regardless of race.
The fragmentation of US society, the departure from the healthy "semi-totalitarian" arrangements of the 1930s-1950s, makes the country increasingly unable to withstand a prolonged "cold war" struggle, either in the economy - consider the precipitous decline of competitiveness of US industrial goods despite the decline of the dollar vis-a-vis major currencies or even the "wooden ruble" - or in military affairs.
National stamina for a long conflict continues to decline, from the World War II victory with 300,000 combat deaths; the Korean War, a stalemate with about 38,000 losses; the Vietnam War defeat, with about 50,000 losses; to the present Iraq war, clearly moving to defeat, with only 3,000 losses and a mercenary army increasingly absorbing in its ranks anyone it can attract, including ex-criminals.
Carl von Clausewitz rightly noted a strong correlation between internal and foreign policy. Indeed, US survival in the Cold War was possible only because it accepted the enemy's socioeconomic arrangements - state involvement in economic activity; concern with real production more than profit; combining toughness and repressiveness with a broad security net not for "minorities" but for the majority of the poor; and, above all, planning for a generations-long economic and military struggle. None of these elements can be found in the present US, which is based on social fragmentation and a "bubble" economy of financial speculation and stock-market games.
This does not mean that the enemies of the US should be pleased. The "bubble economy" has produced a "stock-market war" - a war of quick and reckless adventures in which all available "cash" can be used for the mirage of a quick geopolitical profit, even if this "cash" is nuclear weapons. In fact, in sharp contrast with the calculating foreign policy of the Cold War era, the present elite - like many on Wall Street - preach the motto "shoot first, think later".
Dmitry Shlapentokh, PhD, is associate professor of history, College of Liberal Arts and Sciences, Indiana University South Bend. He is author of East Against West: The First Encounter - The Life of Themistocles, 2005.
(Copyright 2007 Asia Times Online Ltd. All rights reserved. Please conta
This emphasis has also produced a US society with group but not national interests, where concern for the majority of the poor is ignored not just by the Republican right but by the liberal left. In fact, the attempt to change "affirmative action" preferential treatment based on race and gender to a policy based on low income is constantly rejected by the left as well as the right. The reason is simple: "affirmative action" benefits mostly middle-to-upper-class blacks and females; a change would benefit the poor and lower-middle classes regardless of race.
The fragmentation of US society, the departure from the healthy "semi-totalitarian" arrangements of the 1930s-1950s, makes the country increasingly unable to withstand a prolonged "cold war" struggle, either in the economy - consider the precipitous decline of competitiveness of US industrial goods despite the decline of the dollar vis-a-vis major currencies or even the "wooden ruble" - or in military affairs.
National stamina for a long conflict continues to decline, from the World War II victory with 300,000 combat deaths; the Korean War, a stalemate with about 38,000 losses; the Vietnam War defeat, with about 50,000 losses; to the present Iraq war, clearly moving to defeat, with only 3,000 losses and a mercenary army increasingly absorbing in its ranks anyone it can attract, including ex-criminals.
Carl von Clausewitz rightly noted a strong correlation between internal and foreign policy. Indeed, US survival in the Cold War was possible only because it accepted the enemy's socioeconomic arrangements - state involvement in economic activity; concern with real production more than profit; combining toughness and repressiveness with a broad security net not for "minorities" but for the majority of the poor; and, above all, planning for a generations-long economic and military struggle. None of these elements can be found in the present US, which is based on social fragmentation and a "bubble" economy of financial speculation and stock-market games.
This does not mean that the enemies of the US should be pleased. The "bubble economy" has produced a "stock-market war" - a war of quick and reckless adventures in which all available "cash" can be used for the mirage of a quick geopolitical profit, even if this "cash" is nuclear weapons. In fact, in sharp contrast with the calculating foreign policy of the Cold War era, the present elite - like many on Wall Street - preach the motto "shoot first, think later".
Dmitry Shlapentokh, PhD, is associate professor of history, College of Liberal Arts and Sciences, Indiana University South Bend. He is author of East Against West: The First Encounter - The Life of Themistocles, 2005.
(Copyright 2007 Asia Times Online Ltd. All rights reserved. Please conta
[FONT=Arial, Helvetica, sans-serif] Stock Market Drop[/FONT]
[FONT=Arial, Helvetica, sans-serif] [/FONT][FONT=Arial, Helvetica, sans-serif](WASHINGTON - February 28 -- DEAN BAKER
Co-director of the Center for Economic and Policy Research, Baker said today: "A lower stock market is good for a lot of people. If corn prices fell 30 percent, that would be bad for you if you're a corn farmer, but good for you if you weren't and ate a lot of corn. Stock ownership is highly concentrated; 75 percent of the population holds little or no stock (including retirement accounts), so if stocks go down and you don't own any, you're better off. [/FONT]
[FONT=Arial, Helvetica, sans-serif]"When stocks plunge in value, it's similar to a situation where there are trillions of dollars in counterfeit currency, held by a small group of people, and the police seize and burn it. This is good news for the rest of us because the trillions of dollars of counterfeit money will not be bidding up the prices of things like houses and cars. Any honest economist would have to concede this point -- it's elementary economics, but many economists tend to cheer the stock market, in effect favoring the wealthy at everyone else's expense." [/FONT]
[FONT=Arial, Helvetica, sans-serif]Baker's most recent book is "Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer." [/FONT]
[FONT=Arial, Helvetica, sans-serif]He added: "Greenspan, as head of the Federal Reserve in 1987 intervened to bail out the stock market. The federal government takes as a goal higher stock prices -- they don't have higher wages as a policy. In retrospect, this intervention set the stage for the stock bubble of the 1990s. The U.S. government in effect subsidizes stock owners, who tend to be wealthier." More Information [/FONT]
[FONT=Arial, Helvetica, sans-serif]DOUG HENWOOD
Henwood is editor of Left Business Observer and author of the book Wall Street. He said today: "We won't know for a few weeks whether yesterday's 416-point decline in the Dow Jones Industrial Average was just one of those seizures that financial markets experience now and then -- and so of concern to just a handful of speculators -- or something of broader economic significance. [/FONT]
[FONT=Arial, Helvetica, sans-serif]"But the market did seem worried about some real things, a departure from about five years of profound complacency. There's the possibility of a meaningful slowdown in both the U.S. and Chinese economies, which have become so tied together that trouble in one means trouble in the other; the bursting of a speculative bubble in Chinese stocks; and the chance that troubles in the U.S. housing market, which Wall Street has declared to be largely over, are actually getting seriously worse." [/FONT]
[FONT=Arial, Helvetica, sans-serif]###[/FONT]
A lower stock market has been good for me. I've been betting against it.
Hope it rises so I can short some more.
Hope it rises so I can short some more.
umpty and Goldie
Fairy Tales from Grimm that Just Got Grimmer
by Lila Rajiva
www.dissidentvoice.org
March 1, 2007
Fairy Tales from Grimm that Just Got Grimmer
by Lila Rajiva
www.dissidentvoice.org
March 1, 2007
Fairy Tale One: Humpty Dumpty Has a Great Fall
On February 27 2007, the Dow Jones stock market index sank by more than 500 points during the day -- a follow through of an earlier collapse of the Chinese market index. It was the biggest hit that the Dow has taken since September 11, 2001, although not in percent terms.
As usual the financial press was ready with a raft of explanations, prognostications, rationalizations and rebuttals.
The party might be over, but on paper, at least, investor confidence is high and consumer confidence even higher.
Shades of 1999-2000
Remember Dow 36,000: The New Strategy for Profiting From the Coming Rise in the Stock Market, by syndicated columnist James Glassman and Kevin Hassett, a one-time economist at the Fed? Published near the market top and around when Enron, World Com and other crooked corporate giants had already begun serious meltdowns, the book chivvied readers to "Buy anytime, hold forever," as well as use index funds -- basically baskets of stocks that represent the whole market. Only a few short months thereafter the market imploded. Nary an apology or explanation since from the authors. Not one, to the thousands of lay people who must have taken their expert advice to jump into stocks at the precise moment when real investors like Warren Buffett were cashing out.
Of course Dow 36,000 was only one of a crowd of improbable Dows: there was also Dow 40,000 and even Dow 100,000. The defining lunacy of the time was to believe that it was a time when rules didn’t apply. The “New Economy,” they called it, the shamans of the internet boom . . . true believers like telecom prophet George Gilder who went broke believing.
Why the fixation on this one index of about 30 stocks? Simple. The Dow Jones Industrials Average, to give it its full title, is the main marketing tool that brokers and analysts in the wholesale market use to con mom and pop investors into buying often just when they should be selling.
The DJIA numbers, which is what most people mean when they talk about the market being up or down, are seriously misleading because they don’t represent the whole market -- only a handful of very highly capitalized, very unrepresentative stocks.
It’s the DJIA that has been hitting new highs since 2006 -- to cheerleading and pom-poms from the press. But a lesser-known index, the Standard & Poor 500 (S&P500) shows what’s going on much better. A 10-year chart of the S&P 500 shows that it’s not hitting any new highs but is actually buckling as it struggles to regain its 2000 heights. In the process, it seems to have formed the two ominous peaks that symbolize what is known as a Double Top to stock traders. A Double Top is a classic signal of a potentially drastic reversal in the offing. And as if to underline where things could be heading in a hurry, Goldman Sachs bank, the fountainhead of financial speculation in the economy (Goldman’s former boss, Hank Paulson was hired as Treasury Secretary), has taken a wallop too. Goldman, note, is heavily invested in China and in the US housing market.
Moral of the Story: Anyone with their pension funds or children’s college money riding on this market shouldn’t bank on living too happily ever after.
Fairy Tale Two: Goldilocks and the Housing Bear
* There was a 14.4 percent drop in housing starts ( the number of new houses being built) in January 2007.
* 600,000 real estate jobs are expected to be lost in 2007.
* Borrowing based on home equity which has been pumping up consumer spending (6% of GDP at the peak) is declining.
* 1 trillion ($1,000bn) worth of mortgages are going to be adjusted upwards this year to higher interest rates. An exceptionally high number of these ARMs (adjustable rate mortgages) have been made to sub-prime or less than solidly credit worthy borrowers -- so the adjustment is sure to cause an avalanche of defaults and foreclosures.
OK. Some overstretched, low-end homeowners have got in over their head somewhere. So what?
Here’s what.
Nouriel Roubini, economics professor at New York University, says the housing bust will pull America into recession. Mr. Roubini writes: “America faces a ‘reverse cycle’ where a credit crunch has hit before the slowdown, a rare pattern. Normally, recession comes first, setting off credit troubles in its wake. We have a housing recession, an auto recession, a manufacturing recession, and a real investment recession already present.”
Now here’s the kicker:
“If all this is happening in what the consensus terms as a ‘Goldilocks economy,’ what would happen if the economy slows down?”
And Goldie’s porridge looks like it could cool off in a hurry. Nobody has taken the . . . er . . . bull by the horns yet, but here is what Alan Greenspan, chief chef of the Federal Reserve from 1989 to 2006, responsible for whipping up more credit porridge than any one else in history, and the single most important figure in the US economy for nearly two decades, had to say over the last weekend in February:
“When you get this far away from a recession invariably forces build up for the next recession, and indeed we are beginning to see that sign.”
Moral of the Story: When even Uncle Alan says so, it looks like Goldie should watch out. At least one bear is back. And a great big one it is, too.
Lila Rajiva is a freelance journalist and the author of The Language of Empire: Abu Ghraib and the American Media (Monthly Review Press, 2005), and the forthcoming Mobs, Messiahs and Markets (with Bill Bonner, Wiley, September, 2007). She has also contributed chapters to One of the Guys, edited by Tara McKelvey and Barbara Ehrenreich (Seal Press, 2007), an anthology of writing on women as torturers, and to The Third World -- Opposing Viewpoints, edited by David Haugen (Greenhaven, 2006). She is currently working on creating her own website and finishing a new book on mass thinking.
Other Articles by Lila Rajiva
* Satan and Sex Manias: Moral Panics and the Mob Mind
* The Shape-Shifting of a Hitman
* Minding the Crowd
* Plugging the G
The market is amazing. I can recall attending stock seminars in the 1980's when the first Dow 10 000 predictions were made. Fantastical then but they turned out to be true. If the American economy is goosed again, inflation can build and a Dow of 20 000 is probably reachable. No, not in a single year. But in ten. I am fond of doomsters and gold bugs and the wonderfully eccentric characters in those camps. They have fundamentals on their side like rabbits have twitches but so far it's meant little. There either is a helluva lot of resiliency in American capital markets or some stubborn and ghoulishly smart manipulation. We'll see what the future holds. But it'll not be like anything any one of us thinks.
Someone mentioned ghoulish manipulators to me the other day but I'v forgotten the terms he used, something about a fund.
Juicing the Stock Market
The Secret Maneuverings of the Plunge Protection Team
by Mike Whitney
www.dissidentvoice.org
March 4, 2007
The Secret Maneuverings of the Plunge Protection Team
by Mike Whitney
www.dissidentvoice.org
March 4, 2007
The Working Group on Financial Markets, also know as the Plunge Protection Team, was created by Ronald Reagan to prevent a repeat of the Wall Street meltdown of October 1987. Its members include the Secretary of the Treasury, the Chairman of the Federal Reserve, the Chairman of the SEC and the Chairman of the Commodity Futures Trading Commission. Recently, the team has been on high alert given the increased volatility of the markets and what Hank Paulson calls “the systemic risk posed by hedge funds and derivatives.”
Last Tuesday’s 416-point drop in the stock market has sent tremors through the global system. An 8% freefall on the Chinese stock exchange triggered a massive equities sell-off that continued sporadically throughout the week. The sudden shift in sentiment, from Bull to Bear, has drawn more attention to deeply rooted “systemic” problems in the US economy. US manufacturing is already in recession, the dollar continues to weaken, consumer spending is flat, and the sub-prime market in real estate has begun to nosedive. These have all contributed to the markets’ erratic behavior and created the likelihood that the Plunge Protection Team may be stealthily intervening behind the scenes.
According to John Crudele of the New York Post, the Plunge Protection Team’s (PPT) modus operandi was revealed by a former member of the Federal Reserve Board, Robert Heller. Heller said that disasters could be mitigated by “buying market averages in the futures market, thus stabilizing the market as a whole.” This appears to be the strategy that has been used.
Former Clinton advisor George Stephanopoulos verified the existence of The Plunge Protection Team (as well as its methods) in an appearance on Good Morning America on Sept 17, 2000. Stephanopoulos said:
There is no evidence that the Fed has ever purchased market futures.
However, the Fed has reacted during times of crises to flood the market with liquidity. One of the purposes of the Federal Reserve System is to maintain the integrity of the financial system, which, by nature, is unstable. Thus, one could argue that the Fed would be shirking its duty by not responding to crises. Also, simply because the Fed acts as a buffer, it doesn't mean markets don't go down. The Nasdaq fell 78% top to bottom from 2000 to 2003.
On the other hand, there is an argument that the Fed has encouraged risk-taking more than what is prudent since market participants believe that the Fed will always bail them out in times of crises. This, the argument goes, encourages excessive speculation, and mis-prices risk in the market. I agree with this to some extent.
The market is going lower. I had a very scary conversation with a salesman from an investment bank today.
However, the Fed has reacted during times of crises to flood the market with liquidity. One of the purposes of the Federal Reserve System is to maintain the integrity of the financial system, which, by nature, is unstable. Thus, one could argue that the Fed would be shirking its duty by not responding to crises. Also, simply because the Fed acts as a buffer, it doesn't mean markets don't go down. The Nasdaq fell 78% top to bottom from 2000 to 2003.
On the other hand, there is an argument that the Fed has encouraged risk-taking more than what is prudent since market participants believe that the Fed will always bail them out in times of crises. This, the argument goes, encourages excessive speculation, and mis-prices risk in the market. I agree with this to some extent.
The market is going lower. I had a very scary conversation with a salesman from an investment bank today.
