The Dow falls 225 point today because "investors" fear Greece's bail out will drag down the rest of Europe's economy. I am always intrigued by analysis statements about investors, as though they are a collective group that some how communicates their fears and thus the market climbs or falls.
But the "market" of "investors" are suppose to be independent and act independent. So does the immediacy of today's business news networks and the internet create instant signals by a few major brokerage houses of their fear and thus driving reaction at lightening speed across the market, thus major swings in market values that otherwise would be much less. Before the instant electronic age, it took days for analysts to decipher market trends and recommend buys and sells. Today it only takes minutes and we see huge hundred point plus swings daily.
How can you have a relative stable investment market when there are such instantaneous communication of fears by a limited few or the opposite, optimism or greed by the same few? Are they using valid computer models to determine this fear or optimism? Or are they just educated hunches. And who cares, if you work both sides with hedge funds or insured derivatives? There is no down side. The investment market is more resembling a Las Vegas casino sport book than a stock market based on corporate value and ownership. Trends were tracked over weeks not hours, as it is today.
World economies are attached and the economic health of any country or economic market is critical to the overall world economic health. The amount of product and investment trade across borders is like no other time in history. We are reaching a stage of economic wealth saturation and the only economic growth to be obtained is by transferring it from one economy to another. In this situation there are always winners and loosers and never stability.
Economists from around the world should hold a summit and work on a model that can create a stable global economy. There has to be some type of model that can achieve this lofty goal. If not, the world will be in constant economic turmoil and potential armed conflict.
This is compounded with the depletion of the worlds oil reserves and the increase in energy cost. No economy can withstand the escalation of energy costs that transfers wealth from the energy consumptive economies to the producer's economies, which are not necessarily operating in a free market situation. This can only lead to armed conflicts, as the wealth is transferred to just a few individuals and the working class populations are drained of their wealth start to rebel.
In today's global economies, an American President, regardless of party, can do very little to influence positive growth in the market. The only option is controlling national debt relative to GDP and the availability of money in the system. But Congress is the ones that control the purse strings, so even the president is limited in his/her ability to make such changes.
The only way to increase tax revenue without increasing the tax rate is for more individuals to be employed and paying taxes, as well as having enough disposable income to consume more products than basic life sustaining. That is the only effective way to reduce the national debt and have a growing economy. Otherwise, with the elimination of public services and securities, you are just transferring the debt from a collective shared cost to an individual cost, which reduces disposable income and consumerism, and thus the need for more employees.
Reducing taxes on the wealthiest does not translate into more jobs because they invest in portfolios that do not require the creation of products, thus fewer individuals are employed, and thus there is less demand for products and services. But the wealthy become wealthier by transferring wealth among themselves in a closed economy. That is the situation we have today in America. Thanks George W Bush.
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