Markets Still Collapsing

Dow_10908 As late as 1:30 pm, when the Dow was just a few points below where it started the morning, it looked like we were going to enjoy a fairly uneventful day.  And then it started falling.  And falling.  And falling.  It ultimately lost 679 points, 7.3%, finishing at 8,579.  The S&P dropped 7.6%, and NASDAQ dropped 5.5%.  It hasn't been this low since May 2003.  Economist Paul Krugman (grimly) reflected:

But you want to remember Robert Shiller’s classic real-time study of the 1987 crash. Basically, the crash had nothing to do with any news item. Investors sold because — drum roll! — prices were falling.

On a separate note, one good thing is that there haven’t been any reports of people on Wall Street jumping out of windows. That’s because the windows in modern office buildings don’t open.

Robert Reich added this:

After the market closed today, Bank of America announced a significant deterioration in people's ability to repay credit-card and other consumer debt.

The central fact is this: consumers in the real economy are coming to the end of their capacities to keep spending. They can't take on any more debt. And with the costs of energy, food, and health insurance all soaring, they're doing the only thing they can. They're pulling in their belts. They're leaving the malls. They're not buying a new car or TV or anything else they can do without.

How are you managing the news?  Discuss.

  • genop (unverified)

    I feel helpless to do anything other than vote and watch as carnage litters the financial landscape. Do economists have terminology for the multi-institutional contraction occurring in banking, stocks, and home values? I know the term on the street, "an economic cluster f%#*&". From "trickle down" economics to "top down" failure. I guess all the tax stimulus incentives manipulated the market a bit too much, eh? Now we await "rock bottom". Happy landing.

  • Steve Bucknum (unverified)

    I'm one of those people whose income is now about 50% of what it was a year ago. Optional spending really isn't an in the cards. Not that I'm starving or not paying the mortgage, because we saw this coming and lowered our bills about a year ago, but I really feel for those people who are caught unaware and unable to cope with these events.

    What do we call this now? Petite Depression?

    The next shoe to drop will be interest rates climbing. With a short supply of money, and a market demanding credit, the only question is, "how high will the interest rates go?" 12%, 15%, 20%?

    The next Federal government, 3 months + from now, will have its hands full. And we in the Democratic Party want to win because ....??? Oh yeah, it will be worse (if that's possible) under the Republicants (can't get anything right).

  • RichW (unverified)

    What puzles me is where is all this money going?

    In free market two-sided transactions, there should be winners as well as losers. The person or builder who made a bunch of money during the housing boom should be sitting pretty after he sold his property at the peak. Did all these winners snort coke and thus dissapate their wealth, or are there a bunch of fat cats out there trying to hide from the fact that they made a lot of money? Where are the short sellers who made a fortune as the market went down?

    Show me the money!

  • (Show?)

    It's pretty clear: The better Obama does in the polls, the more the stock market sinks.

  • RichW (unverified)

    "It's pretty clear: The better Obama does in the polls, the more the stock market sinks.

    So Jack, then this is just another form of "blockbusting", where the white folk go into a panic sell because the black guy is moving into the neighborhood.

    Or perhaps we are smarter than that and the reverse is true. Obama goes up in the pols because the market is sinking.

  • RichW (unverified)

    "After the market closed today, Bank of America announced a significant deterioration in people's ability to repay credit-card and other consumer debt."

    Is that the same Bank of America that keeps sending me offers for a 3.6% credit card with a huge spending limit. Just got one yesterday.

  • Scott J (unverified)

    Time to get a grip.

    This isn't the first time we've had huge market losses and shaky confidence leading to decreased consumer spending.

    It is called a BUSINESS CYCLE. A BUSINESS CYCLE is a part of any economy.

    Remember the stagflation in the late 70's early 80s? Got through that. Remember the Crash of '87? Got through that. Remember the "Asian Crisis of '98? Got through that. Remember the "Dot Com Bust" of 2000? Got through that. Remember the recession following 9/11? Got through that.

    We will move through this as well without the need for Democrats or Republicans to save the day.

    The only reason it is such a big topic here in Blue Orgasm is becuase it is of political value to Sen. Obama

  • Winter (unverified)

    RichW - Check this out.

  • mp97303 (unverified)

    The majority of todays collapse was due to GM, a Dow component, having a major S&P downgrade. GM was down 31% and dragged the Dow with it.

  • mp97303 (unverified)

    It's pretty clear: The better Obama does in the polls, the more the stock market sinks.

    It's pretty clear: The worse Bush does in the polls, the more the stock market sinks.

  • mlw (unverified)

    The present drop emphasizes the importance of age appropriate investments. If you're 65 years old, it's idiocy to have all your money in stocks. Being in my early 30s and heavily favoring stocks for their long term greater growth potential, I don't like seeing my nest egg shrink, but then I remember that the Great Depression lasted about 12 years and the soonest I'll have to cash out anything is when my daughter goes to college in 15 years. My retirement is even farther off. Yeah, it sucked to have my home equity line of credit cut off for no good reason before I started some planned renovations, but such is life - it's a house, not an ATM, after all.

    The rise of "life cycle" plans that shift to more conservative investments based on the owner's age is a great way of "idiot proofing" the system.

    As for the political implications, your comment is beneath you, Jack. People overwhelmingly trust the Dems more than the R's on the economy. I don't love Obama's position on the economy - I would favor more bottom up, fewer restrictions on market forces, and more transparency - but it's really not significantly different from the positions on the right. I just about choked on my beer when McCain started talking about mortgage aid - it's clearly contrary to his economic philosophy and a rather obvious pander.

  • jerri (unverified)

    $10 billion/mo. Big number. NOT. Per person it is $33.

    Less than a daily Starbucks.

    Quit trying to scare us.

  • (Show?)

    Okay, I admit my crack about Obama's poll numbers and the stock market was a joke. But it just points out the danger in positing simplistic relationships between any one factor and stock prices.

    It appears we are heading into a global recession. I think the U. S. Government needs to take strong measures to attempt to deal with it, but its power to influence events remains limited.

  • mp97303 (unverified)


    You are spot on regarding the "target date" retirement funds. They are perfect for those who don't know much about investing or just don't really care. The perfect invest and forget tool.

  • rw (unverified)

    Having muscled through all of those crises; having not managed to really get myself well-started on financially shipshape; having a largish student loan to work on with payments always a minimum of fifty dollars more than I can comfortably afford AND take care of my progeny (no cable, no plasma or widescreens, no credit cards/cc debt, no new cars, none of that lifestyle shit they go on about as the "sacrifices" taken away from people) as a parent is wont to do; having just moved to a new GREAT job with a terrible and expensive health plan and not-very-beneficial retirement offerings; having said all that?

    I've watched my fledgling nest-egg now shrink by half. I feel kind of despondent and frustrated about it sometimes. I keep an eye on my inner rage and helplessness. Frustrating to work like a bastard on lining yourself out and getting life in order for the next generation, to have it carved out from under before you are properly started being a magnificent grownup!

    But so what on the material hopes? Never had any of that other stuff, nor the nest egg. So life will go on as it always has been. I will feed us, we will be housed. I will get to work every day.

    I turn my attention to the small, sweet, daily moments of my life, I breathe and work to appreciate again the ephemeral, the intangible. And I keep salting my little dollars away in that plan designed for my thirty years ahead, praying the companies "They" are buying me into do not collapse and disappear in the meantime.

    That's how I'm doing it. With a resolute vote and an effortful shrug.

  • A-NON (unverified)

    If you take away the monetary inflation, which they tried to hide by eliminating reporting of M3, there has been no real growth in the economy. So you can go all the way back to where the market was when Bush took over.

    Except now the fundamentals are worse. An increasing share of global oil trade is non-US dollars, so we're less commodity based. Population has grown, real wages have fallen, productivity has stagnated... There's much more money supply in the system with less support.

    That's the bottom line. The DOW belongs around 8,000 if you take away monetary inflation. The bailout just makes sure that the losses are on the backs of the taxpayer and the Bush/Neocon friendly banks and industries are insulated.

    David Wu and all you BO readers who were deluded into thinking that Pelosi was anything but another Lieberman and this "bailout" was something other than another PATRIOT Act consolidation of power for the Neocon crime gang are just plain stupid.

    I got out as soon as the Fed stopped publishing M3, because that's when visibility into the markets stopped. That's when "semi-strong form" market efficiency ended. The Presidents Working Group on Capital Markets (aka "plunge protection team") was basically a who's who of Bush Admin insiders, and these were the guys stepping in with public money supply to stop any sell-off in the markets before the average Joe could realize just how bad it was. It's all a racket, folks. Pelosi and the Dem leadership is on the dole. Sorry to pop your bubbles.

  • (Show?)

    I see everyone's remaining calm in the crisis.

    Personally, I'd love to be as sanguine about this mess as Scott upthread, but while he may be right that this is a "market cycle," that doesn't change the reality of its violence. You can use a euphemism to dismiss something, but I suspect there are people who are really hurting as a result who aren't quite so philosophical.

    As I write this, the Hang Seng is down 7%, the Nikkei is down nearly 10%, and I have a hunch Wall Street traders aren't going to wake tomorrow morning feeling all that chipper and optimistic. This could hurt before it's all over.

  • RW (unverified)

    Jeff -- yah, thanks for the no-euphemism zone. I am being forced to face how alienated I feel from my "home" culture ever more. Daily now as I listen to the materialistic whining and crying, I get to review my bitterness and resentment from being left out of decent health care to recover from a massive wreck - so I could do more than just muscle us through unbelievably BAD economy here since 1999... believe me, any of us who are not cell-phone-talking, plasma-watchin', home-ownin' etc folks ARE going to have to work on ourselves to deal with the pain of the gap and the ignorance of most of the materially entoyed who now are whimpering.

    I have to really watch myself and try to focus on the intelligent and copmassionate things I think alongside the irritation with those who can't keep their eyes on any ball but their own and so do never grasp without effort what this reality of effort really is.

    I have hopes that somehow they will be crashed through that materialism/security-based portal of narcissism and as a nation we all might be pushed into a deeper, more-visceral understanding of realities that are spirit-killing.

    I think we're all gonna have to find our species of authentic spirituality and social justice commonality and live in that. Maybe live in it long enough to cure what a lifetime of materialism has done to us socially and psychologically.

    Me, I have to every day say to myself: I got out of that abusive workplace, I'm in a really GREAT job, and no amount of benefit or real pay loss can compare to that - I have a job and it's a job where I'm not being torn down.

    Long mantra: but I say it. Every day. I have a job. Nobody's battering me. I have a job. I can thrive there. I have a job.

    That's about all one can really focus one's entitlement sickness on right now!

  • Lani (unverified)

    Has the latest Wall Street mess finally convinced McCain to stop pushing for Social Security privatization?

  • (Show?)

    I am doing OK. I am sheltered because I work at a private college, and I thank every day for that. I moved a significant portion of my 401 into safer investments a few months ago but I still have taken about a 20% hit this year. And I have long put small bits of money every month into savings bonds. Everyone laughs at me, but those babies are returning 6%+ annually. I-Bonds are great.

    And I did NOT take a job that i was offered two years ago in Washington DC that would have required me to take out an interest only loan. Thank god.

  • Harry Kershner (unverified)

    Re: "David Wu and all you BO readers who were deluded into thinking that Pelosi was anything but another Lieberman and this "bailout" was something other than another PATRIOT Act consolidation of power for the Neocon crime gang are just plain stupid."


    "According to statistician John Williams [shadowstats] who measures inflation, unemployment, and GDP according to the methodology used prior to the Clinton regime’s corruption of these measures, the US unemployment rate is currently at 14.7% and the inflation rate is 13.2%. Consequently, real US GDP growth in the 21st century has been negative. [The Clinton regime (and the Boskin Commission) rigged the CPI in order to cheat retirees out of their Social Security cost of living adjustments and ceased to count discouraged workers who cannot find a job as unemployed. To be counted as unemployed, a person has to be actively seeking a job.] This is not a picture of an economy that a bailout of financial institution balance sheets will revive. As the Paulson bailout does not address the mortgage problem per se, defaults and foreclosures are likely to rise." (The End of American Hegemony By Paul Craig Roberts)

  • rw (unverified)

    Lani: over and over I try to tell BO hardliners that you are wrong about TOTAL privatization of Social Security by McCain. But you folks really want to stay on-message even if it's wrong, don't you?

    Fact checkers have spelled it out for those of you who WANT the truth!!! It's horrible enough that idiot man wants to put ANY of it into the markets, or, that is, open a percentage of our funds therein to OUR management of them at our wish in the markets. Few of us are really qualified to do much or any of that, so to take SS and subject it to folks' lack of ability to know what they do not know... I'm not for it.

    But what I am for, Lani, is for telling the truth. It's awful enough that Palin and McCain WOULD stop tomorrow's girls from having an abortion if they needed it... but that is NOT their platform. So stick to the facts, they are bad enough. And seeing the truths of both campaigns, good and bad, is a powerful place for you to stand.

    Soapbox... eh. I just get irritated -- I find the source, I bring it here, and yet some are mere parrots who like that li'l string of rhythmic sounds... and so they will say it till recency erases that with a new string of them.

  • (Show?)


    Not everyone reads here every day, or reads every post, much less every comment.

    I've been more intermittent in recent weeks than I was over the summer, for instance, and this is the first I've heard of you having commented on the matter.

    Attributing this to "BO hardliners" whatever that means is unevidenced at best, and seems on the edge of the problem you're criticizing if not actually falling into it.

    That said, I agree with the principle you advance, among other things because in the long run politics and policies based on honest efforts at critical thinking and discerning truth are apt to be better than those with other bases.

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