Tuesday, August 31, 2010

The Cow Belongs to Wall Street, Keep Your Hands Off Her

The New York markets were up substantially today based on some feel good news about the economy. But those gains were wiped out in the early afternoon by the release of minutes from the latest Federal Reserve Open Markets Committee meeting. Basically the members were split with the majority acknowledging the economy is not recovering but they don’t want to purchase assets on a large scale.

This means the Fed won’t be pumping trillions of new dollars into the economy and the risk of deflation looms larger. This immediately drove up the price of US Treasury bonds and the interest yield down which normally translates into lower mortgage rates. Lower interest rates are meaningless if nobody will issue a mortgage.

Asian markets are tanking on the Fed news which comes on top of fears that Japan may not be able handle the surging value of the Yen which threatens their export based economy. The price of oil dropped $3 a barrel as traders are reluctant to hold any oil in inventory with the collapse of the world economy looming.

The stock market has had dismally low trading volumes all month and today was even slower. If volume gets low enough any large sale that can’t find a buyer could trigger a market crash. Supposedly they have put measures in place to prevent another flash crash but nothing short of closing the doors will halt an old fashioned panic. So much for the free unregulated market being the driver of the US economy (you know the envy of the world).

The Republicans have their predatory eyes turned toward Social Security again with the circling pack being led by Alan Simpson who has made disparaging comparisons between SS recipients and those who would steal milk from a cow. Funneling this money into the stock market would help offset the loss of 401(k) contributions.

Of course there would be no way to continue paying SS checks if they stopped receiving payroll taxes without cashing in the Treasury bonds the SS Trust Fund is holding. This would punch a huge hole in the Federal budget if this happened so the Republicans must justify not paying the money out. This scheme is as insane as Alan Simpson but this is what the Republicans will do if they come back to power. Having destroyed the economy along with the middle class, stealing grandma’s retirement check is now the only game in town.  www.prairie2.com