The Market Crash

The "market" crashed a couple days ago, and everybody is in panic, but the actual economy isn't really any different than it was two weeks ago when the "market" looked good.

While the latest drop in numbers coincided with the budget deal in Congress, they were not caused by that budget deal. The issues in Greece, Italy, Ireland, and Spain overshadow our problems. The news from the European Central Bank and our own manufacturing outlook report (numbers from the ISM about our manufacturing sector show only 8 of the last 20 months the manufacturing employment picture was positive) were the cause, with a little help from China saying their economy might also be slowing down. And this all came in a week.

Don't get me wrong, the budget deal was a bad one, with Congress still kicking the can down the road on the debt and the disasterous spending levels that have been going on for several (about 8) years now.

This has become like pushing the bus over the cliff. The TEA party pushed candidates into Congress to stop the bus from going off the cliff, and this deal amounts to "well, we will let you push the front tires over the edge, but then we must talk about finding a way to keep the rest of it from going over for a while.

The liberals argument was spectacularly disingenuous. To say that the conservatives were going to cause the US to default on its bonds is like calling up your bank and telling them you won't be able to pay off your Mastercard with your Visa card unless the bank increases your limit on your Visa Card. But if they do that, you promise to reduce the amount you spend in the future, but not reduce it to what you make.

As for the overall outlook for the economy, in light of the employment data released today (and last month) and the probability of global famine that I wrote of last week, gloomy just doesn't convey a strong enough message. To put it bluntly, the economy, from the perspective of the jobs market, will not see any real improvement for several years - if it ever does. Our failure to see the road ahead, and our outdated tax code (we should have changed over to sales based tax code before now, and taxed sales on the Internet as well) have more than likely doomed our nation to be thrown on the scrap heap of history.

Now, it is just a matter of how many years before the disaster arrives. It could be two, or it could be twenty-two. Either way, I don't see much chance that we will recover. The last real recovery was in the mid 80's. The ones in the late 90's and then in 2004-2006 were fake, phoney, bubbles doomed to burst. And indeed, at this time, our economy is a bubble built on another bubble.

I will have to write more on this later, as I have run out of time