The headline on this article in today’s Washington Post says it all: “Senate leaders’ talks on shutdown, debt limit stall as sides await market’s reaction”. Apparently, the leaders in Congress are waiting to see what happens to the stock market today to see if there is a crisis that will force them to act.
It is as if the Dow Jones is some kind of thermometer that measures the strength of a fever and if today it should rise or any changes that do occur are relatively modest, then there is no urgency to solve the problem. If it crashes, then there is cause for action. The way people talk of ‘the market’ reverentially, as if it some kind of living thing whose mood must be gauged to tell us the state of the economy, is something to behold
Never mind that people are hurting because they are not being paid, basic services are not being provided, and the world’s biggest economy grinds to a halt. If stock prices stay up, then it is still party time for the people who really matter, the wealthy.
A steep decline in the stock market is not a good thing in general, because many people’s retirement accounts are invested in it and a stock market crash could cause a major hit on their savings. So it is really odd that this is being looked for in order to get anything done. It looks like the US has forgotten how to run the government in an orderly fashion and needs crises to act.
As of the time of this posting (about 11:45 am Eastern time in the US), the market had declined slightly by about 0.2%. Is that good? Bad? It seems to me to be neither but what do I know?
As far as I can tell, most investors (and in particular, big institutional investors) aren’t panicking (yet) because nobody really believes that Congress could be that stupid. The general sentiment seems to be that everyone expects a last minute deal.
More like an angry and vengeful God who must be appeased with human sacrifices.
I’m not always so sure that the stock market is really that strongly correlated with economic security for the average person. I’ve lived through a number of stock market booms during which most people made no gains whatsoever. If politicians were the least bit economically and statistically literate, they would be finding better means of deciding whether things were going well or poorly.
The other thing is, it’s possible that a booming stock market can exist not in spite of, but because your average worker is getting screwed.
Ah, but the stock market is quite highly correlated with the performance of the investment portfolios of the wealthy, which is pretty much the only barometer that they actually care about.
Ah, yes, the deity of the Free Marketeers: The Invisible Hand!
Or, as Tom Tomorrow puts it, “If you’re invisible, why can I see you?”
Tom Tomorrow is awesome, but the invisible hand doesn’t deserve the derision -- no matter how much people misunderstand it.
Since many of the wealthy are high level executives of major corporations, steady-state stock market works out just fine too. They tend to have a lot of shares just handed out to them (my CEO got 400,000 shares handed to him a few years ago for no reason whatsoever -- is it listed in SEC filings simply as a “gift”).
I would put in my vote with Dunc. Most of the rich don’t believe that we will actually default, they’ve told their lackeys that they’ll have to back down at the last minute. Although the Tea Party is the larger instigator, they couldn’t have done it without the support of the mainstream Republicans. Cantor and Boehner are playing games right now.
The one saving grace at the moment is that the default is not due to the inability to pay but the unwillingness to authorize payments. This is is preventing a forward looking sell off since (some of the) investors can wait until after this mess is solved to get their money.
However the moment that this problem is not solved there will be an implosion of the financial market.
And, since the system in the US is set up to allow only the very wealthy to run for office, it shouldn’t be any surprise that they, and their pet pundits, should be so deeply concerned about the DJ performance: every single adult they know is concerned about the DJ, so it’s obviously very important to the whole country.
Never mind that the vast majority of people in the US don’t own any stock, and the majority of those who do have only tiny amounts in their investment accounts, compared to the untold billions held by assholes like the Kochs and Adelson and Gates and Buffett and et c., et c.. Everyone the politicians and pundits know is worried about the stock market, so that must mean that everyone is.
There’s also the case that companies have more money for shareholder dividends when they screw over more workers, so an increase in stock value can just mean a shift in $ from those who work to people who cash in from passive ownership.
I think the point is rather that what is often called the invisible hand of the free market is actually the visible hand of political power. That’s why you can see it.
“The invisible hand” is a metaphor used to explain a concept in economics, it is not the concept itself. However, it is used glibly by free market fundamentalists to hide the fact that they don’t really understand how economics works in the real world, and it is used by wealthy predators to hide the fact that they are actually gaming the system in their favor. In both cases, it is used to imply derisively that other people don’t understand the subject. Tom Tomorrow, as Dunc points out, is justified in pouring derision on these groups.