Aug

4

Some were saying to expect a big decline in case a debt deal would not occur. A failure to compromise was the "bad news". Eventually a compromise was found. An impressive bear trap was set up. Markets opened sharply higher and accelerated to the downside. So it seems that actually the "bad news", as the markets perceived it, was the done deal. The news is that Mr Market is finally reacting negatively to bad news. It was right about time. Today it went down because there are concerns about a "weak economy"… when over the past months nothing could shake the dip buyers' confidence. The game may be changed. I think a new cycle has emerged and we'll have to study and find new patterns and behaviors. But how many points does the S&P have to go down before they offer another stimulus?

Gary Rogan writes: 

It is true and I even mentioned it earlier today that "a failure to compromise would be terrifying" was one of the big lies our sadistic fascist government has promulgated. I refuse to believe that that in itself was a bear trap. Why? Because it was clear to anyone with an ounce of common sense that while the Republicans had ALL THE CARDS to completely stop the insanity HAD THEY HAD THE WILL (how? by simply refusing to extend the debt limit NO MATTER WHAT) they DID NOT HAVE THE WILL, at least not to go through a few days like today while being blamed for them and not capitulate. So in some sense they HAD NO REAL CARDS, and thus the bear trap would have to be for very innocent bulls, more innocent than one can credibly believe in.

The deal in itself had no effect in my opinion. The market is a very imperfect predictive device in that it acts on emotion at least as much as on the information. A few days of turmoil and orderly declines did indeed shake the confidence enough so that the market finally had an excuse to react to the bad news it has known for a long time, weeks or months. The reversal yesterday gave an excuse to call the end of the improbable down run sequence. The Roadrunner suspended in mid-air for a few moments after running past the edge of a cliff comes to mind.
 


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2 Comments so far

  1. Scott Baker on August 7, 2011 5:56 pm

    I brand new to your site, and haven’t even attended a meeting yet, so I should probably keep my trap shut…but I won’t.
    The two groups I head are combined not as as large as yours, but we do know a few things about the causes of booms and busts that aren’t mentioned here - like the speculation on Land. We Georgists say that Land Value belongs to the community that created it through its demand (The General Mechanics library is a great place to gather, but how many would go there if it was in central Wyoming? Location. See what I mean?). On the other hand, we believe in returning 100% of production to the producer.
    So, we are both socialist and free market believers, and not in some wishy washy way either.
    http://www.change.org/petitions/a-new-form-of-capitalism-geonomics
    http://www.change.org/petitions/replace-property-tax-with-ground-rent
    Anyway, without a Land Value Tax (and untaxing everything else: wages, sales, and true capital like buildings), these cycles will always repeat (in fact, they repeat just about every 18 years, going back at least to the mid-1700s, and maybe a full thousand years if you count Western Europe. Mason Gaffney and before him, Homer Hoyt, have written extensively about this and detailed the steps).
    I am also working with the Public Banking Initiative (PBI) to bring State Banking to New York, as the NY Coordinator (there are 14 bills across the country, based on the wildly successful Bank of North Dakota.
    http://www.change.org/petitions/support-a-public-state-bank-for-new-york-state
    Finally, like Henry George, I am a Greenbacker - believing it is the sovereign right of the nation to produce its own darn money, without a private central bank.
    http://www.change.org/petitions/end-the-debt-crisis-with-debt-free-united-states-notes

  2. Alec Misra on August 13, 2011 12:30 am

    Hi, at the risk of seeming presumptuous I have just posted on exactly this topic (in fact a slew of posts) on my blog. Since it is rather a long comment, you can find the post here:

    Is it Time for QE3?

    http://sicsemperliberalis.wordpress.com/2011/08/11/is-it-time-for-qe3/

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