The Dow dropped almost 2% today closing below 12,000, traders were spooked by unexpected economic news from around the world. China posted a 7.5 billion trade deficit in February which was their first in six years. Chinese officials blamed the Lunar New Year holiday for delaying shipments but acknowledged that their trade surplus would be smaller this year.
But, this may just be China posturing ahead of the G-20 currency meeting to be held in Beijing at the end of March where the under valued Yuan will be the big issue. The US trade deficit on the other hand is exploding with oil imports leading the surge.
Wall Street is also jittery over the Euro-zone debt or specifically the specter of European bonds falling through the floor. Moody’s (the same people who rated sub-prime loans as AAA investments) have downgraded Spain’s debt and unlike Greece or Ireland, Spain is a fairly large segment of Europe’s economy. This is driving down the Euro against the USD but the hedge funds had been betting record amounts against the USD and these two opposing views are translating into market instability.
None of this nonsense should affect the real world but unfortunately Reagan set us on a course of trading the cow for magic beans. The state pension funds are in trouble because they invested heavily in Wall Street’s magic beans. There is no reason states should be putting any money into Wall Street. They invest in Wall Street on one hand and borrow from Wall Street on the other hand to build public projects. Why do millionaires need to take a cut on both ends of this from the public coffers? Can you say Kelptocracy?
Speaking of the real economy, Initial Unemployment Claims are up again and approaching 400,000 last week indicating the job market is not recovering. At the very least it indicates falling wages, if not the actual loss of jobs. The experts have been saying fuel prices have not risen enough to really hurt the economy. The experts were predicting jobless claims would fall. The experts are also recommending giant beanstalk futures. www.prairie2.com