Stocks are falling sharply today, and some of the cause is bad news from Europe. Many countries are having the same crises of benefits outstripping the financial resources to provide them, and populations grown accustomed to their perks and angry at the prospect of losing them. And the global economy is so intertwined that the bell tolls for us all.
It’s small comfort that the US is not alone in its travails—and, in fact, is by no means the closest to the brink. We all know about Greece’s troubles, and now Italy and Spain give special cause for concern. In the understatement of the week:
European Commission president Jose Manuel Barroso urged European Union officials to reassess the recent bailout funds, as “markets remain to be convinced that we are taking the appropriate steps to resolve the crisis.”
Yes indeed, “markets remain to be convinced.” And the “appropriate steps” are either too disputed or too painful for many to contemplate, or both.
The US has just been through a Congressional struggle over the debt ceiling that has left the markets “to be convinced” as well. Congress and the President took the easy way out and deferred the real decisions for manana and a committee. It’s a recipe for increasing anxiety and uncertainty—and those are not good things for markets.
But what would be a good thing for the market? To allow the debt to skyrocket, increase the spending, and postpone the day of reckoning? Even if that reassured the market temporarily in the short term (and I don’t think it would), it’s hard to dispute the fact that it is postponing the inevitable. Those who believe the deficit must be reined in would like to do it sooner rather than later, knowing that there will be pain in the short term. That’s called a “correction” by those who believe the temporary grief will forestall greater problems later.
Today’s stock market fall does not seem to be mainly about what has recently occurred in the US with respect to the deficit and the debt ceiling crisis. The consensus is that it primarily reflects events in Europe, as well as an expected dearth of good news in the US unemployment figures about to come out. But still, the debt ceiling crisis could hardly have reassured a single person, with its length and its wrangling and its ultimate “solution” that solves nothing except the immediate issue of raising the ceiling itself.
And then “fear itself” adds to the brew, as none other than FDR once said.