August 4, 2011 Financial Markets Wake Up
Prices heading down for seven days in a row while the Congress haggled over exactly how to cap the national debt and reduce the continuing deficits may have signaled investors unease over the coming impact on business and the economy. Todays disastrous losses then reflect the spreading recognition that the cut of government spending will result in a slower economy and the continuation of high unemployment.
Reputable and mainstream economists have taught that decreased spending will multiply to an even larger cut in total demand. Yet the media and everybody else signed on to the mantra that the rising national debt spells disaster for our country.
This naïve reckoning fails on the facts but probably results from the preferences of many Americans to limit government. The enemy is not so much what government does, but that government does it.
Yet the economic engine will slow down as spending slows down. These new limitations on government disbursements will increase our already high and long lasting unemployment.
No wonder then todays massive drop: the consequences of Washingtons fiscal restructure means a coming wave of lower spending higher unemployment.
DJIA -4.31 percent
NASDAQ -5.08 percent
S&P500 -4.78 percent