Tag: Great Recession 2008

The Wounded Stock Market and the Political Abandonment of the Working Class

Michael MatheronLeave a comment

August 4, 2011

Today, I’m not simply referencing the equities market collapse over the past week, including today’s significant losses as of 2:30 p.m. There are many other reasons for this week’s swan dive. So, eager as I may be to do so, I can’t put this entirely at the door of the GOP and its maniacal dancing monkeys, the Tea party. This week, though, undeniably, the debt “deal” is among the forces decimating equity prices and Americans’ confidence. 

The deal’s unrelenting tight-fisted approach seems, at present, to rule out any fiscal stimulus emerging from Congress. The independent Federal Reserve’s “according to Hoyle” monetary stimulus efforts seem to have done little good stimulating employment growth and lending so far, and it shouldn’t be expected to be helpful in the future. The fed funds rate has for a long time been as low as a snake in a cesspool, and, today, the Treasuries that were almost a pariah two days ago are rallying across the board, sending interest rates lower than low. To what avail after four years of recession? (Note: We never emerged from it in 2009 . . .) And now, without fiscal stimulus, the country and the equally shaky world faces a likely killing dose of American “fiscal austerity” and the further unemployment it brings with it. Who will be able to buy cars, refrigerators, computers, or bubble gum? Who, then, will be able to provide the earnings that could revive this critically sick stock market? 

Well, no one, it seems, in D.C., thought about that very much. The Tea Party wrecking crew pushed our overly accommodating President and most of the Democratic and Republican parties into a final package that will pummel employment at all levels and in all sectors. The debt ceiling deal just signed into law will, perhaps radically, worsen employment, lessen personal income, and diminish already anemic personal spending. If we avoid what would be remembered as the 2nd Great Depression, we need to make some WPA-type Hail Mary passes, and soon. 

For now, though, the Tea Party and the GOP it commands stand stolidly and stubbornly by the windows in their House and watch all this destruction without so much as offering the tiniest ray of hope that we, as a nation, will pull together again as we did in the 1930s. Unfortunately, the President, an apparently conflict averse leader, as well as much of the far too “civil” Democratic party, also watch from afar as well. Just watching, it seems, deeming it too uncivil or uncouth or strenuous to fight for the country. The unindicted co-conspirators.

Debt Ceiling Deadline – Treasuries Send Mixed Message in July

Michael MatheronLeave a comment

August 1, 2011

Among commentators almost everywhere, this July was a month of growing worry about the likelihood of raising the debt ceiling. The Treasury bond market, often a bellwether of investor nervousness, basked in overall confidence, however. The 10-year Treasury Note, for example, actually rallied 40 basis points from July 1st through July 29th, the last trading day of the month, with yields dropping from 3.19% to 2.79%.  In the face of a worrying outlook for Congressional action on the debt ceiling and deficit, this was quite a rally – a rather exuberant show of confidence.  Six month T-Bills, however, looked ahead at what it viewed as storm clouds and ran the other way, with prices falling, and yields rising from 0.002 to 0.09, still a historic low yield even at 0.09, but a noticeable price decline nonetheless. 

This divergence between the long and the short ends of the yield curve signals a reluctance to buy short-term treasuries with a six month horizon while the outcome of debt ceilings and deficits are so uncertain. But the rally in long term securities appears to be a bet that any injury to U.S. creditworthiness resulting from the debt ceiling drama will be relatively short-lived, otherwise we’d have witnessed a July swan dive in the 10-year notes.  We saw quite the opposite.

With the government rapidly running out of cash, let’s hope the Treasury market has it right, especially the 10-year neighborhood. They’re supposed to be the “smart money,” after all.  Yet, they’ve been misled and misleading before, many times; have we forgotten the pants down mishap of a few years ago? And then, particularly in the unknown waters we still sail upon, as Donald Rumsfeld once lectured us – there are those unknown unknowns . . .