These days our interest in the stock markets is mostly academic, but the past several days have been quite interesting nonetheless. Pretty much everywhere the stock markets are panicking, and suddenly the most alarmed pundits are surpassing even our usual gloom and doom.
The Dow Jones Industrial Average took a catastrophic 1008-point plunge Monday before a roller coaster rally reduced that to a still dire drop of more than 588 points, which is about 3.7 percent of the market’s total value lost in a single day, which is enough for some pundits with a economic stake in their reputations to advise people to invest heavily in bottled water and canned foods. Our own reputation for economic prognostications is of negligible value, as we won’t even pretend to know what the hell is going on out there, but for what it’s worth we’ll go on record to say that it apocalyptic predictions sound plausible enough to us.
Maybe it’s just that early 1008-point plunge that’s got us fretful. We’re old enough enough to recall a time with the DJIA measured in four digits, and when a three-digit drop dominated the next day’s headlines, so a three-digit drop has a scary sound to our ears even in this age of a Dow so many thousands ahead of even the Reagan days. That 588-point closing plunge even seems frightening, especially after the previous week of steep decline, and there’s little elsewhere in the news to provide reassurance that this is just one of those occasional dips in the inevitable road to prosperity. The popular explanation is that the Chinese economy, which might or might not be the world’s first largest economy depending on which method you believe, is suddenly going from vastly overstated good fortune to probably overstated decline and that the rest of the world is running the numbers and realizing that as a result they’ll fall far short of the promises that have been made to their restive peoples. The rest of the world is mostly the United States, which might or might not be the world’s first largest economy, depending on which method you believe, and the European Union, which is by all accounts a solid third in the pecking order, even with Greece’s ongoing catastrophe and all the the other brewing problems with that misguided project to meld fissiparous Europe into one state and economy, and the Latin American economies that have lately seen a plunge in the value of their currency, and the African states that are so dysfunctional they barely rate a mention in the stock market news, and the Asian countries that are overwhelmed by the Chinese, so the global situation doesn’t seem at all encouraging.
We have some faith in our fellow citizens that they’ll still be able to provide the products and services they’ve made their lives’ work, so that the bottled water and canned goods aren’t the next shrewd investment, but we have little faith in any of the governments and we’re still pretty gloomy and doomy. The communist Chinese method of mandating by law that by power of the gun the economy will continue to climb no matter how many ghost cities they build is proving powerless against the almighty market forces, the United States’ and European Union’s method of simply printing enough money to pay of all the promises is proving just as ineffectual, and the rest of the world is of course entirely hapless. The inevitable fact that ghost cities and printed money and false promises of government-engineered property aren’t enough to sustain a global economy seem to have reached their conclusion.
Those Dow Jones Industrial Averages were always overstated, to our admittedly unreliable thinking, by all all the quantitative easing of free money that had nowhere to go in a zero body yield world except the stock markets. All of the eye-popping numbers the markets produced seemed wildly incongruent with an economy that had a record lows in labor participation and declining wages and the scant job claims outstripped by immigration, and the current panic seems more in line with the reality of the actual situation. Although we don’t recommend investing in bottled water and canned goods we don’t expect any good news about the economy soon.
For those who insist on a silver lining we we will note that the economy should soon its rightful place among the pressing issues of the day, and that the public will not be inclined to buy any arguments for the status quo.
— Bud Norman