I am coming to the impression that the only thing that matters to the people at the helm of the economic ship, where you and I are in steerage with subprime bilge up around our knees about now, is the Dow Jones Industrial Average. I got out of stocks three years ago because I thought Greenspan was letting us all go down between the shoals of debt and inflation. I thereby missed some profits and was baffled that the market defied all the economic gravity of our situation.
Something that should matter just got kicked to the curb: the going price of our treasury bonds took an instant hit because of the Fed's move. Those bonds are the means by which your government borrows money. Via that means, for instance, the Chinese have lent us about a trillion dollars. You think they want to do that much longer? I wonder if they are tolerating such stupidity because they know the money is being spent on useless military adventures in the middle east...which have paved the way for the Chinese to access the Arab oil resources. That would be the oil our brilliant Commandeer in Chief was told his war would secure for the US! In any event, the rising price of borrowing money [and borrowing money is all the Republican president who knows how to run oil companies into the ground can understand of finance... not the repaying] means the amount of your taxes spent keeping our country's creditors happy must go up.
Historically the market was basically an ever upward trending thing. But that is not a given any more than the superior fortunes of white males is a given. It was a trend based on an America full of jobs with few foreign competitors and a vast stock of cheap resources the ends of which we thought we'd never see. I see now that brief swing at 13000 was economic smoke and mirrors. The liquidity they pursue is made of ever more frail and less substantial inventions...now your sorryassed over-mortgaged house is being put up by the bank and the only outfit willing to take it at face value for collateral is the guys in charge of making the economy appear sound. You just watch what happens in the next few days after the stock market is jonesing for another money fix and the rest of the world has to decide if it would rather be holding euros or dollars in light of yet another dilution. It is not a dilution of the dollar so much as of the faith that the dollar is representative of sound financial infrastructure rather than one swamped in debt. Just watch. I am on the sidelines just watching and grateful that tax-free municipal bonds and money markets based on them have not yet disappeared.
Granted there is an appealing unambiguous sense of the "score" or the "bottom line" about that one stock market number as a metric. Symbols and simplifications are a reliable road to error. It is a metric that matters in a direct way only to investors. Most of us are only indirectly investors in securities and far more affected by the percentage of our taxes that go into debt service and wars as compared to education, infrastructure and health care. The debt has mounted astronomically under the last three Republican administrations. Sucking all the real money out of the economy and making up for it with Federal reserve bank policy and Treasury bond sales that try to substitute borrowed money, has helped replace our factories with financial
America's part in the course of the world economy had to contract in any fair scenario. Our G7 and latter participations in planning globalization is necessary to make the vast populations of other countries more equal as players in the economy. Although industries shape these policies, they seem unaware that economies are ultimately just the tools by which we dispose and share the bounty nature left us. That is why I do not complain that our trading partners have become our equals and betters in capitalism. What I object to is that we as a country decided to forget about balancing our own checkbook and, to please a swaggering neocon minority and an insecure uneducated majority, simply continued to run a quasi-colonial foreign policy. Do you remember what Afghanistan did to the Soviet government? Do you think George Bush remembers Gorbachev?
I would recommend to those who wonder why so much is going to hell in our country's finances "in spite" of the Federal Reserve Bank's desperate measures and Bush's assurance that we are just in a little "slowdown" that you read a bit more widely. Asia Times is particularly valuable both for the political insight into important rising Asian nations and for the variety and depth of its economic writers. Even AT's conservative columnists, like Hutchinson, called the Fed's predicament quite accurately months ago. Agonist also has some very informed perspectives. Brad DeLong is prolific and I find him sometimes over my head but worth the time.
A question to billionaires from Wall Street and elsewhere who have had a perpetual picnic with republican tax cuts and pour a huge [to us it is huge] amount of cash into GOP campaign coffers: Do you have somewhere to hide all the money and continue to make money in this economic environment? Are you sure the Bush league and its policies are your best friend? Do you feel no pain at all? Sustainability is not just a concept for ecologists, you know.
And for the rest of us, yes, fellow voters, I do think it is teh stupid economy. What makes you think the other errors of our leadership have not grown so enormous as to become entangled in our financial lives?
Power also comes out of the end of a breadline, if you let it get long enough.