Friday, September 23, 2011

Not part of their Constituency

The index that tracks stocks worldwide has crossed the line into official Bear Market territory yesterday having lost more than 20% since the peak in May. This represents an evaporation of 10 trillion dollars in equity value. The US markets managed to close in black today, but that was only today, overall the losses have been massive, losing 6% just this week.

Stock indexes were invented to serve as a gauge of economic activity since the value of the companies’ stock was assumed to reflect how well things are going, and the stocks in an index are selected on that basis. It doesn’t really work that way anymore as stock trades are not transparent, what with Dark Markets where 60% of all trading happens in secret, high-speed trading that makes money by driving prices up and down and hedge funds who try to drive stocks in a certain direction by any means. But, the markets are still important in that they have captured so much middle class wealth. The decline of stock value, while not reflecting corporate health (they’re rolling in money), does matter as so much of people’s wealth is going up in smoke.

Commodities were way down across the board with gold losing 6% just today, silver lost 18%. This was the worst drop for silver since the bubble burst after the run up in the early 80s.

The G-20 Finance Ministers are warning that time is running out to fix the Euro zone crisis as the collapse of the second largest currency in the world will surely cause another recession, but they are really understating the problem.

The head of the IMF is warning that the US and Europe’s fixation on austerity is dooming the world economy. Normally the IMF prescribes austerity for all ills, but we know that when they do that it’s really about opening the door for corporations to loot and pillage. Apparently they’ve decided they can’t steal the entire planet all at once.

Speaker Boner managed to pass a Continuing Budget Resolution to keep the country running past Tuesday when some agencies begin to run out of money. The bill even included 3.6 billion for disaster relief, but the problem is that the tea baggers insisted on loading it up with offsetting budget cuts unacceptable to the Senate where Democrats are determined to not give into the hostage takers. The vote was 59 to 36 with even a few Senate Republicans siding with Democrats to reject the cuts. A government shut down is the last thing the economy needs at this point.
We can assume Republicans will not pass Obama’s jobs bill, and even if they did, it’s a fraction of what is needed to jump start the economy. The longer that action is delayed the worse the problem gets. Republicans have no problem with that, the people that suffer aren’t part of their constituency.