You’re not supposed to read too much into a single day’s market results, because they react for all kinds of reasons or no reason at all.
But when stock markets tank world wide, the Dow plunges over 500 points (4.3%) after already falling seven hundred points in the last 10 days, and 10 year US bond rates decline to about 2.5 percent, it’s pretty clear the markets are expecting the economy to take a dive. And it’s equally clear they are not convinced by the gibberish Congress and the White House have been flogging for months, like deficits and unsustainable debt, hyperinflation, rising interest rates, or bond vigilantes. They never did believe that confidence fairy nonsense.
As repentant conservative David Frum had to admit today, that liberal econ guy with the beard (and many others making the same points) have been right, about everything, while the Peterson deficit hysterics and believers in confidence fairies who insisted all we needed to spur the economy was to cut government spending to make room for growth were wrong. Grossly, massively, tragically but predictably wrong.
It is obvious that what the economy desperately needs, to keep from further collapsing and making millions more jobless, is more government spending, a rescue for the states, extended unemployment insurance, more Medicaid funding, more spending on infrastructure and just paying people to do the work that needs to be done. There are no excuses for not understanding this now.
But is any one in D.C. paying attention? Is anyone left who is not a Zombie or a Pod Person? Everyone in Congress, instead of hanging their heads in shame and rushing to reverse the strategic blunder they enacted this week, is instead rushing to get on the Super AntiDemocratic Catfood Commission, whose main mission is to protect the war machine and punish older people, the poor and the sick by extracting another trillion dollars from their pockets.
And the President of the United States, instead of firing every one of his economic and political advisers, will go on a bus ride, through a part of the country his policies have ignored, claiming to listen to the people. But we know that means he’ll just be watching the polls to see how much his terrible policies are understood by the American people. They’ll catch on soon enough.
The US 10-year bond rate is now down to 2.5%. So much for those bond vigilantes. What this rate is saying is that markets are pricing in terrible economic performance, quite possibly a double dip. And it also says that Washington’s deficit obsession has been utterly, totally wrong-headed.
And more on the European contribution to US jitters from David Dayen.