Market Tanks…On Old News

September 22nd, 2011 at 9:46 am

Could someone explain to me what the currently tanking stock market knows today that it didn’t know yesterday? 

The twist was expected, at about the magnitude the Fed announced ($400 bn).  Yes, the FOMC statement (the Fed’s press release) was downbeat, but they already told us they were planning to keep rates low until 2013. 

There are drops in Euro and Chinese manufacturing indexes out this AM, but markets were declining before these releases—this selloff seems keyed off of the Fed report. 

If there’s any rationality to it—a big ‘if’—I’d say it has to do with being stuck in box #3 (see box in post below this one).  The absence of a commitment to attack the problem of weak demand through fiscal stimulus is our biggest economic problem right now.  And it’s not going away.

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7 comments in reply to "Market Tanks…On Old News"

  1. Dan Furlano says:

    My GUESS…

    Since congress defeated the spending bill the government runs out of money in 8 days. Last time I checked there was only 10b left on the treasury statement.

    Institutional investors are not going to get caught in another cat fight over spending.


  2. Dan Furlano says:

    In case you missed it:

    http://www.nytimes.com/2011/09/22/us/politics/house-defeats-stopgap-spending-bill-with-disaster-relief-hanging-in-the-balance.html?_r=1&hp

    WASHINGTON — House Republican leaders suffered a surprising setback on Wednesday when the House rejected their version of a stopgap spending bill, leaving unclear how Congress will provide money to keep the government open after Sept. 30 and aid victims of a string of costly recent natural disasters…


  3. Tyler says:

    “The absence of a commitment to attack the problem of weak demand through fiscal stimulus is our biggest economic problem right now.” – Jared Bernstein

    “Spending cuts and tax increases slow growth by pulling money out of the economy.” – Dean Baker

    After reading these quotes from two of my favorite economists, I conclude that the contractionary effects of letting the Bush tax cuts expire for the rich should be offset by the expansionary effects of a new trillion-dollar stimulus.

    Hey, we can dream, can’t we?


  4. Fred Donaldson says:

    The market is tanking because the elites are concerned that long term interest rates will fall and regular Americans will refinance, buy new homes, and see house values increase.

    More ownership in society by average people is not progress to those who want to own the means of production and put you in a company house you rent, while you buy from the company store.

    Anything that helps the middle class seems to be detested by the top one tenth of one percent – on principle, not logic, and that includes affordable mortgages, Social Security, Medicare and government regulation of utilities and major industries.

    Lower gold today also leads to people selling equities to get cash to cover their bets.


  5. Tom Cammarata says:

    Consider this economic global warming. Some may deny the state of the economy and what’s necessary to fix it (Robert Reich’s dreaded “S” word), but such denial won’t stop the downslide, both in the market and in the economy.

    Essentially, everyone but the Republicans realize something must be done, and thanks to the Tea Party, nothing will be done.

    So, the betting now will be on how long this new recession will last. The longer that is expected or feared, the deeper the market will drop.

    As the ad used to say, it’s not nice to fool with Mother Nature.


  6. perplexed says:

    With 2/3 of the wealth in the hands (or more likely brokerage accounts) of the top 5%, its probably just the idle rich trying to outdo each other at the crap tables. It’ll go the other way when they think the other aristocrats might beat them to the punch. Not really much of a concern for the peasant classes; now that everyone knows trickle down was just an amusing little game that oligarchs play, expectations have adjusted accordingly.


  7. Jean says:

    If you ask me, it tanked because it could. Where else is there liquidity and profit these days?


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