The stock selloff the past two days and particularly today--500 down--is ridiculous. What's so bearish? U.S. Federal gov't set to spend nearly $4.3 trillion this year. Okay, so spending GROWTH over last year has been slowing, but 1,000 points down in two days? Come on.
Maybe China's devaluation last week was deflationary as I posted and maybe investors are worried, irrationally, about a Fed rate hike, but this is crazy.
If there's one thing that history has shown time and time again, it's that you ALWAYS have to buy into panic. A-L-W-A-Y-S.
There is a chance this time the panic may last longer than expected.
ReplyDeleteWasn't there a study that says the economy 6 months before the election determines outcome?
Top layer says Dems want recession now, recovery March 2016. Repubs want recession March 2016.
Maybe. I'm not sure. I can see potential problems in October and thereafter when we hit the debt limit, but not really anything right now. I think it's an overreaction.
ReplyDeleteI've noticed Warren always tracked fiscal expansion but now spends more time on bank money expansion. Steve Keen was always too focused on bank money.
DeleteThough gov may issue more debt, oil sector is set to issue a lot less.
Peel second layer, Saudis are aligned with Repubs, specifically Bush family.
The US markets have been ignoring the global situation for some time and focusing on the nascent recovery and the Fed. The Chinese move seems to have woken some people up and they are reacting, probably overreacting. Should be a bounce.
ReplyDeleteBut there are good reasons from concern. The US has not decoupled from the global economy and right now the US recovery such as it is, along with the trade deficit, is carrying it. I suspect that a lot of people think that the US cannot hold things up if the emerging world pulls back and the Europe goes into recession. The US will feel the brunt, too, although not as hard.
Looking forward, there is a lot of uncertainty in the US, too, as the political campaign heats up and Congress is reluctant to move on anything controversial. There are plenty of people that think they will profit politically from grandstand moves. While the GOP establishment wants to avoid another kerfuffle over the debt ceiling, Ted Cruz is not paying attention to them.
Peel the third layer. It's not as easy to see if the Chinese favor Repubs or Dems.
DeleteApparently Nixon got the ball rolling. It does seem the Chinese currently align with Russia. Obviously Russia is against the current regime in Ukraine. The current regime in Ukraine obviously favors Biden.
The Chinese were fully capable of controlling their economy and stock market. As Warren likes to put it, it's the new kids trained in U.S. economics that are screwing with the levers.
"But there are good reasons from concern. The US has not decoupled from the global economy and right now the US recovery such as it is, along with the trade deficit, is carrying it. I suspect that a lot of people think that the US cannot hold things up if the emerging world pulls back and the Europe goes into recession. The US will feel the brunt, too, although not as hard."
ReplyDeleteIn a rational world, this would be a very good thing indeed. The US should try to run as large "trade deficits" as possible. And you can use US military and soft power to expand the dollar zone.
Foreigners: Hers, have some free lunch
Idiot US leadership: Noooooooo!
The other thing is US is paying for protecting its "allies" stop that. That puts pressure on them as they have to expand their military budget while US redirects theirs.
ReplyDeleteThe world's private domestic balance is $2,495.82 billion and growing. I used data from Trading Economics. The bear market will continue until there's a massive bailout. Then we shorts shall become longs.
ReplyDeleteI use trading economics too, great site. Could you explain your number? Unless near all public sector debt is held by foreign governments, I don't see it being such a small number.
DeleteBesides,it is a good thing( from the perspective the public sector needs to satiate private sector savings desires) that it is growing.
If the rate of growth of the private sector domestic balance is slowing, there is something to worry about.