Wall Street exits, stage right, from the United States economy. The Dow closed 513 points down today and is down over 1,200 points since July 21. Both the Nasdaq and the S&P. This is the worst one day drop since October 2008, otherwise known as the great financial Armageddon.
Only three of the 500 stocks in the Standard & Poor's 500 index had gains. Oil fell by 6 percent. The yield on the two-year Treasury note hit a record low as investors sought out relatively stable investments.
All three major stock indexes are down 10 percent or more from their previous highs, a drop-off that is considered to be a market correction. A drop of 20 percent or more signifies the start of a bear market, an extended period of stock declines.
Why? Why now? Many believe it's the absolute embarrassing inability of Congress to solve a problem. Dylan Ratigan verbalizes the sentiment:
Look at what we have received in the past two weeks from our government – the debt ceiling debate was the American lawmakers, President and Congress putting on an illustration for the world about how they intend to solve problems as a group. They exposed their lack of integrity and that fundamental evidence is so repugnant to the investment community. So what the market cares about is not moral judgment…. what they do care about is the inability of the government to solve problems in any context.
Others think it's about economic indicators, all pointing to, at best, an economy that isn't growing enough to create jobs. Yet others point to the never ending inability of Europe to contain their own crisis.
We think it's finally dawning on the green shoots that economic growth which squeezes the middle class will eventually implode. Wealth inequality has already been identified as a major economic problem in the United States, now affecting macro economic growth. If that doesn't convince you, notice consumer spending is now D.O.A.. Americans are plain squeezed like the blood from a stone. They have no more to give.
Worse, the great debt ceiling debackle showed not only how Congress cannot add, but also increases income inequality. Yet, Mr. Wall Street Bail out himself, Tim Geithner is staying as the Treasury Secretary. Obama touts bad trade deals known to reduce jobs as an employment program. He also puts the most notorious offshore outsourcers into the White House.
Meanwhile our Congress can't even get it together to fund the FAA, only recently reaching a deal after America erupted in disgust at their refusal.
Republicans are even worse, touting deficit reductions, which dramatically cut government spending as a jobs program, complete with an agenda to strip what's left of social safety nets for the U.S. middle class.
You cannot grow an economy having a government so bad the entire globe is disgusted, promote multinational corporate lobbyist agendas, cut jobs on a whim to improve your quarterly profit statement and expect something to change.
While main street has known this story going on 30 years, the news finally has traveled to Wall Street and today they voiced their reaction.