Hold Onto Yer Hats, Boys, We're Doomed!

Donald Trump carefully managing the economy in a time of crisis

Well, after a one day respite in the collapse of the stock market, what is happening today, which although possibly not the greatest point collapse lately, is perhaps more insidious:  A frightening level of instability which might very well presage a true disaster.

Here's the account of what is happening in the Washington Post:

"The markets plunged in early trading...Stocks bounced back at midmorning, after the Federal Reserve announced it would slash the benchmark U.S. interest rate by half a percentage point, lifting the Dow Jones industrial average by 300 points.

But the euphoria was short-lived; sending the Dow tumbling more than 560 points before reversing course again. Just before 2 p.m., the Dow was about 800 points in the negative column, or 3 percent. The Standard & Poor’s 500 and Nasdaq composite, meanwhile, were off about 2.8 percent."

The Fed said today that "The fundamentals of the economy remain strong."  That, of course, is why they resorted to a panic-driven cut of interest rates.

Here's today's story in a little more detail:  The market briefly entered positive territory today, but that lasted literally less than fifteen minutes, from about 10:00 to 10:15.  It then returned to the swift collapse that we witnessed last week.

That collapse was arrested by the announcement from the Fed that they had once again succumbed to Donald Trump's bullying, and were lowering interest rates by half a percent; an amount not seen since the 2008 Republican economic collapse.

Sure enough, this artificial goosing of the stock market managed to drive the Dow back up- from 11:30 until 12:10, a grand total of forty minutes!  After which it again returned to its collapse.  As I write this article, at 3:10 Eastern time, the Dow is down 671 points, although profit taking in the last hour is likely to give the market a slight boost before closing.

Now, we need to face this reality:  Unjustified tampering with interest rates to benefit a political actor inevitably gives the stock market a boost, but there is always a price to pay.  As governments get closer and closer to zero percent interest rates, they lose the most important tool they have to deal with economic instability.  And it is the instability that worries me now, more than the actual drop.  Trump will do anything to make the economy look good between now and election day, and then leave us to pay the price, which could be a depression that may never really end.  And if Trump wins, through whatever combination of fraud and treason he can muster?  I want to repeat my belief that the one single reason we had the worst depression in history in 1929, and not in 2008, was because in 1929, we had to wait over three years for a Democrat to take over the Presidency and stop the insane Republican mishandling of the economy, whereas in 2008, we only had to wait three months.  If the Republicans are able to maintain their stranglehold on the government for four more years, and given the already serious weakness of the manufacturing sector in the United States, I do not see how we can ever emerge from the collapse.

Have we traded away our future for a forty minute rise in the Dow?  Stay tuned, folks...the World's Greatest Negotiator is on the job.



Update: And here is Paul Krugman making the same point I was making about Trump having squandered the government's ability to lower interest rates to avoid an economic collapse:



And just to note, there was not a burst of profit taking at the end of today's trading session; the Dow ended up down 786 points, losing another 115 points in the last fifty minutes of trading. Can't wait to see what happens next.


Update No. 2:  We learn from the Washington Post:

“The Fed went a little early,” said Jamie Cox, managing partner of Harris Financial Group. “Everybody knew the Fed was going to lower interest rates, but they left markets with a lot more questions than answers. That’s why the early-morning bounce was quickly sold.”

The Fed went a little early.  Yeah, that's the reason why what should have sent the Dow soaring instead produced a 40 minute disappearing bounce.  Nobody in the mainstream press seems to be expressing the opinion that what caused this disaster was the fact that the Trump administration has screwed the economy with a red hot piece of number 14 rebar, so there is nothing left to cushion the market against sinking to oblivion.

Oh boy, just a few hours until the roller coaster starts up again.  See you tomorrow.