The Blind Leading the Corrupt
by David Atkins ("thereisnospoon")
Oh, the irony:
U.S. stocks advanced, preventing the longest Dow Jones Industrial Average slump since 1978, amid speculation the Federal Reserve may consider another economic stimulus program to prevent a recession.
MasterCard Inc. (MA), the second-biggest payments network, gained 13 percent after profit rose 33 percent as customers’ spending increased. Coca-Cola Co. (KO) and General Electric Co. (GE) added at least 1.5 percent, leading the Dow’s gain. Technology stocks in the Standard & Poor’s 500 Index climbed 1.2 percent, the most among 10 groups. Sprint Nextel Corp. (S) jumped 3.8 percent as Macquarie Group Ltd. raised its recommendation for the shares.
The Dow rose 29.82 points, or 0.3 percent, to 11,896.44 at 4 p.m. in New York after posting a 166-point loss earlier, which was the ninth straight drop. The S&P 500 advanced 0.5 percent to 1,260.34, snapping a seven-day decline.
“Every time we see economic weakness, there will be discussion about more stimulus,” Richard Sichel, who oversees $1.6 billion as chief investment officer at Philadelphia Trust Co., said in telephone interview. “That could be the case given the fairly weak economic figures we’ve had. In addition, the market has given back a lot recently and people started to look at some bargains.”
Let's leave aside for the moment the fact that for most people, it doesn't feel like we ever left the recession. It takes a Wall St. mentality to talk about "avoiding a recession" given the current economic climate.
But anyway, so the hope of some sort of stimulus caused the Dow to rebound, avoiding a post-1978 record slump. This after a prolonged drop caused by....you guessed it: expected weakness due to austerity:
Wall Street, the Times explains, is concerned about whether the debt deal--with its steep spending cuts--will hamper growth and whether the economy can overcome other challenges, like weak consumer spending. New data released today showed that personal spending unexpectedly fell 0.2 percent in June--the first time it has decreased since September 2009--while incomes hardly budged. Reuters adds that investors are also worried about a possible downgrade of America's triple-A credit rating in spite of the debt deal, though Fitch Rating stated shortly after the Senate vote that the risk of a U.S. default is now "extremely low."
Surprise, surprise. Demand creates jobs. Austerity kills jobs. If consumers don't have money to spend, eventually the system seizes up and even well-insulated multinational firms take a hit. So Wall St. is taking up vain hope that the Fed will use more "quantitative easing" to funnel money into the financial sector, to offset the austerity measures that Washington delightfully put in place in the middle of a recession, to prevent the discredited ratings agencies from maybe saying some mean things.
The denizens of Wall St. must be the most short-sighted people on the planet. They've bought our government wholesale and gotten just about everything they've asked for. They've played Republicans and Democrats off of one another, encouraging neoliberal economic policy, free trade, bank bailouts, and then a hoodwinked Tea Party movement to stand up to Democrats just in case they might consider raises taxes even ever so slightly on the rich.
What they've gotten for their trouble is a deadlocked government divided between far-right and center-right with a few mostly powerless center-left and progressives sprinkled in. A government that cannot even begin to function properly, has effectively hollowed out the American middle class, made investment in the future nearly impossible, and is ultimately very bad for business.
And yes, the hedge fund managers and CEOs at the very top of the chain don't care, because they figure that if the American middle class disappears, they can just as easily relocate anywhere else in the world and make money off companies that increasingly depend on global sales rather than the American consumer. But most Wall St. types aren't thinking that far ahead. They're committed to their U.S. lifestyles, and simply can't see any farther than next quarter's profits and next April's tax filings. As Michael Lewis documented in The Big Short, they weren't counting on a government bailout of the housing bubble collapse. They just literally didn't see it coming.
Basically, these folks are way overcompensated, provide little or no value to the real economy, are ruining the country's ability to govern and even harming the ability of their own precious markets to remain healthy. Most of all, while they may have great number-crunching skills and domineering social intelligences, they're really, really stupid when it comes to seeing the big picture consequences of their actions, which is ultimately the most important kind of intelligence there is.
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