Every once in a while market moves coincide with broader reality and that’s what’s happening now. Tuesday’s big swoon in the Dow was the worst in two months and after eight days of carnage the index is headed for its longest decline in thirty years. I’m not the only one who has that summer/fall of 2008 feeling, when the feds were playing catchup to the panic and thought letting Lehman fail would be a really, really smart idea. The market sniffs recession.
Once again: The debt was never the immediate problem. Growth is. The “compromise” will merely slow growth further while doing nothing to promote stability. Friday’s jobs report will be pivotal, but, the ADP hiring survey notwithstanding, it’s likely to be grim, following on anemic reports this week on manufacturing, services and consumer spending. GDP grew at only 0.9 percent for the entire first half of the year. And that’s just the start of the damage. The Economic Policy Institute estimates the budget deal could cost 1.8 million jobs by 2012. The Eurozone crisis also continues.
The Federal Reserve is mighty silent. The best we have is the Onion’s parody of a drunken Chairman Ben Bernanke opening up at his neighborhood bar. ” ‘Look, they don’t want anyone except for the Washington, D.C., bigwigs to know how bad s*** really is,’ said Bernanke, slurring his words as he spoke.”
Historians may look back on this era as a long depression interrupted by what people at the time considered recoveries, much as happened in the Great Depression. The difference then was that FDR was willing to experiment and put people to work, and the government wasn’t paralyzed by extremist politics and ongoing wars. This is the Great Disruption continued. Get used to it.
Note to readers: I’ll be blogging less during August. In September, I’ll be back to making posts every business day. I will update my Twitter feed. You can follow me at jontalton).
Today’s Econ Haiku:
Keep your gub’ment hands
Off my Medicare, brother
Cut the kids’ future