The debt “deal” that the Republican Teahadists convinced an amenable President Obama to agree to won’t actually do much of what it was touted to do. As usual, the political theater of Washington entertaining Washington took center stage while doing nothing to address the crises bubbling around the country. The deficit will continue to set records, largely because the Bush-Obama tax cuts still aren’t paid for and the Bush-Obama occupations also continue to be unpaid. Add to that millions of underemployed Americans, while those who are employed are tending to make less than they did before; none of whom are shopping like they did 5 years ago (because they can’t). Add to that a refusal to understand Economics 101, which says if businesses aren’t spending (which they aren’t; instead, they think hoarding Trillions of dollars of cash is a good idea), then government should spend (especially when consumers no longer can), but the Teahadists force exactly the opposite action (government spending less), and it should be obvious what’s going to happen to the U.S. economy: it will contract. It has to. Every component of GDP is declining, which is exactly what the Teahadists want going into the 2012 election year.
Finally, Wall St. has figured it out. The markets since the “deal” earlier this week have fallen by multiple percentage points. In fact, the Dow today lost 512 points to turn in its worst performance since the 2008 financial crisis. Commodities are all trading sharply lower. All of this was easily forecastable: none of the fundamentals which led up to the 2008 financial crisis have appreciably improved. Some of the commentary would be downright laughable if it weren’t so important to actually understand what happened:
“The conventional wisdom on Wall Street was that the economy was growing — that the worst was behind us,” said Peter Schiff, president of Euro Pacific Capital. “Now what people are realizing is the stimulus didn’t work, and we may be headed back to recession.”
Wall St., like Washington, exists in its own self-made bubble. The reality that the rest of us face (high unemployment, falling wages, foreclosures) were not faced by the moneyed elite. “The conventional wisdom of Wall Street” is a joke. What indices were they looking at that indicated the economy was free of the troubles that assailed it in 2007-2010?
“The stimulus didn’t work.” This is another stupid talking point. What chance did it have to work? It was too small (by at least half) and directed at things that would never cycle the money through the part of the economy that actually matters: consumers. The stimulus couldn’t work when trillions of dollars of taxpayer money were given away to Wall St. firms who continue to sit on it, too dumb to realize they’re still causing the economy harm.
So congratulations, Wall St. I’m so glad there is a shining example of a leading indicator finally catching up to where many of us have been for a long time. It must be irony’s sense of humor or something…