uggabugga





Wednesday, August 29, 2007

Getting worn out:

Have you been following the economy and especially the stock market? You should, because economics is one of the largest factors in elections. It is certain that Bush won reelection and isn't totally in the toilet poll-wise because of the low-interest-rate-fueled housing boom. You say you didn't get a raise last year? Why worry, when your house has appreciated from $150K to $400K? At least for homeowners, that is. (Also, Alan Greenspan, by holding interest rates abnormally low for an extended periot of time, may be considered a Republican "operative" for practical purposes.)

So now that the debt driven post-2001 expansion is falling back on itself, there will be many folks hurting, and when people are hurting economically they vote for Democrats. Like it or not, Republicans always get the driver's seat on foreign policy; Democrats in economic down times.

That's why this summer's stock market action should be of more than passing interest. It is responding to the popping of the housing bubble. How serious is the problem? Nobody quite knows. Some say not to worry because the sub prime market is only $80 billion, which is nothing in a $13 trillion economy. Others say the problem is extensive and that the housing bubble, while it lasted, was what allowed the consumer to continue to buy stuff while wages were stagnant.

Most recently, the stock market has pinned its hopes on the Fed for a rescue of sorts, but it's not clear what monetary policy can do here. When nobody is trusted for a loan, and nobody wants a loan, lowering rates doesn't do much. Fiscial policy is more likely to work (redistritibutive taxes, government programs here - not in Iraq) but that only gets implemented after a recession is firmly in place.

What the underlying economic reality is, and the stock market's crude early-warning signs, bear watching. So what have we learned this summer? That the market is very nervous: a volatile mix of bullish enthusiasm (big in the last 12 months) and real concern that the U.S. economy and consumer is about to retreat. And so we've been treated to big moves on the upside and downside in the stock market. People will get worn out with all the gyrations. Then the direction will establish itself. It could resume upward, but is more likely to be headed down. So pay attention.



4 comments

Actually, the housing bubble, while it lasted, allowed an entire generation to purchase homes who would have been forced to be renters a generation ago.

Don't try and compare the housing bubble to a stock bubble. With a stock bubble, people put their money in stock, which then becomes worthless. With a housing bubble, people put their money into a home, which does NOT become worthless no matter how battered the housing market becomes.

Of course, the subprime market also allowed lots of people to purchase homes who don't have the ability to sustain them. Those people will soon be renting, but in the absence of the low interest rates, those people would have been renting all along.

I understand that Liberals like yourself are having a tough time spinning this economy into bad news. And that's the best news of all.

By Anonymous Anonymous, at 8/30/2007 8:04 AM  

quiddity is "spinning this economy into bad news."

quiddity needs smarter trolls - "nothing to see here, move along" is just not going to work here. my dad, a lifelong economic conservative republican who follows the stock market closely is very concerned about the underlying causes of the current turmoil.

has anyone else noticed the republican tendency to downplay or lie about things which are obviously issues worthy of monitoring and doing something honest about, but which do not fit into their fucked up narrative? Par example, Iraq War, housing bubble, global warming, crumbling infrastructure, health care crisis, to name a few.

By Blogger Live Ink, at 8/30/2007 9:53 AM  

Change Alan Greenspan to Ben S. Bernanke. Same thing different name tag.

By Anonymous Rockie the Dog, at 8/30/2007 11:21 AM  

I love people like the first "anonymous", because it is 99.9% apparent that their arguments come from AM talk radio, and not even their own brains. These guys and myself can only imagine how fun it is to conjure up such crap. Difference is that these guys can only repeat what they like to hear, and I have no idea how to exploit people's ignorance like this.

Truth is, even with the harshest look at what economy Clinton inherited and finally passed on to Bush, for Dubya to even match what happened in the eight years before him, the Dow would have to reach over 20,000.

I bet every "conservative" acquaintance I know who dares to compare these economies a thousand bucks Bush can't match what Clinton did, and they all suddenly reveal their inner financial chickenhawks.

I encourage anyone with a penchant for "liberal spin" with at least $4000 in diversified stock holdings and $1000 bucks to spare to make such a bet that Bush's economy will not grow another 50% in the next 14 months.

Hell, you can even point these guys to Google finance and pick a peak that Clinton inherited and a dip that he gave to Bush.

It's a win-win for you, because you may get these "conservatives" to shut up (no guarantees), or you will win $1000 come Nov 2008, or if you "lose", your stock holdings will grow at least $1000 more than what you pay out.

By Anonymous Anonymous, at 9/03/2007 12:47 AM  

Post a Comment