Yes, we had some bad news yesterday on the continuing high number of new UI claims, but the sell-off is running on not much news -- unless maybe something like THIS. A China ratings house claims that the U.S. is already defaulting on loans by, uh, default -- as a result of a policy to deliberately and systemically weaken the dollar. This makes China sad. Shoot, it makes me sad.
Normally, however, it would not make Wall Street sad. It would be expected to weaken government bonds rather than stocks.
Oh, wait, that QE2 thing is ending. Maybe everyone is realizing the ride is over. A deeply saddened China is pressuring the Fed not to try QE3. Probably things will be back to normal by next Wednesday. We'll pull back from the edge and bounce around for a while in the typical summertime stock market blues -- probably. But what it shows us is how close we are to the edge, and it is still a long way straight down.
My opinion -- and I'm no economist -- is that the best way is just to go on to the bottom and get it over with. That's what Bernanke should do, and he knows it in his heart, though he's unlikely to admit it. Even the idiots in the Obama administration probably know it. If that did happen, by October 2012 things would be starting to rise again. It would be no worse and possibly better for Obama's re-election than the continuing uncertainty and Carteresque malaise.
All the stimulus, TARP, and money printing was not done to save the economy. It was done to save the big banks, the good buddies of the people at the Federal Reserve and in the Treasury Department. The working class, in debt up to their eyeballs and beyond, living paycheck to paycheck, having been sold the lie of consumerism and having signed on the broken line to enslave themselves to the banks for the American Dream, have suffered.
We've already seen, in Madison,WI, how the government union thugs and entitlement zombies will react to the mere mention of "cuts" or reductions. The political elites will refuse to surrender their power by cutting the size of government. They know that if they attempt to wean their dependent constituency from the government teat that cities will burn. Fear and the lust for power will drive them to continue on the current path until the fateful day when the first pebble starts it roll. The avalanche may begin from a bomb blast in the Middle East, or an aircraft carrier suddenly appearing off the coast of Taiwan, or mere words shouted in the trading floor, or it may begin in the 0's and 1's of an algorithm in a bank of supercomputers. However it begins and whenever it begins, the end result will be that we will be swept over the edge of precipice.
It's a good time to remind ourselves about Denninger's Ten Thing circa 2007 and today's new 2011 version.
After this I saw another angel coming down from heaven, having great authority, and the earth was made bright with his glory. And he called out with a mighty voice,
“Fallen, fallen is Babylon the great!
She has become a dwelling place for demons,
a haunt for every unclean spirit,
a haunt for every unclean bird,
a haunt for every unclean and detestable beast.
For all nations have drunk
the wine of the passion of her sexual immorality,
and the kings of the earth have committed immorality with her,
and the merchants of the earth have grown rich from the power of her luxurious living.”
Then I heard another voice from heaven saying,
“Come out of her, my people,
lest you take part in her sins,
lest you share in her plagues;
for her sins are heaped high as heaven,
and God has remembered her iniquities.
Pay her back as she herself has paid back others,
and repay her double for her deeds;
mix a double portion for her in the cup she mixed.
As she glorified herself and lived in luxury,
so give her a like measure of torment and mourning,
since in her heart she says,
‘I sit as a queen,
I am no widow,
and mourning I shall never see.’
For this reason her plagues will come in a single day,
death and mourning and famine,
and she will be burned up with fire;
for mighty is the Lord God who has judged her.”
And the kings of the earth, who committed sexual immorality and lived in luxury with her, will weep and wail over her when they see the smoke of her burning. They will stand far off, in fear of her torment, and say,
“Alas! Alas! You great city,
you mighty city, Babylon!
For in a single hour your judgment has come.”
And the merchants of the earth weep and mourn for her, since no one buys their cargo anymore, cargo of gold, silver, jewels, pearls, fine linen, purple cloth, silk, scarlet cloth, all kinds of scented wood, all kinds of articles of ivory, all kinds of articles of costly wood, bronze, iron and marble, cinnamon, spice, incense, myrrh, frankincense, wine, oil, fine flour, wheat, cattle and sheep, horses and chariots, and slaves, that is, human souls. -- Revelation 18:1-13 (ESV)
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