“What the heck is happening?” That keeps racing through my
head as the world’s markets crash and a staggering wave of fear
races through the world’s financial centers.
Why are we having this meltdown? Why right now?
The real economy is not doing great, but corporate profits
are extremely strong. The nation’s large corporations are loaded
with liquidity. The luxury retail sector is powerful. Autos are
excellent. The agricultural sector is stupendously strong. High
tech and biotech are doing well, sometimes amazingly
well.
The stock market is a barometer of corporate profits and
somehow the barometer is now telling us corporate profits will fall
far and fast — yet the evidence for this is thus far faint. It may
come, but markets, as the old saw goes, forecast ten out of every
five recessions.
For pitiful, grizzled old me, when I see markets falling
this fast, I smell “speculator.” Economists and statisticians are
not trading stocks. TRADERS are trading stocks and if they see a
way to make money by selling or using options or instruments that
are like a sale, they will make money that way. It has very little
to do with the larger economy.
I offer as the world prize exhibit the Crash of ‘87. It
was the biggest Crash ever in history before or since, was done
entirely to make money off a trade between the cash and the futures
of stocks prompted automatically by something laughably called
“portfolio insurance.” Within a few months, the market completely
recovered and there was no recession.
That is, falls are often — not always — an
epiphenomenon, if I have the right word, made by a small group of
willful men within the markets and not connected with the larger
economies.
Yes, Italy has problems. Yes, the USA has problems. Yes,
our debt was just downgraded and rightly so since the federal debt
is just a massive Ponzi where the earlier investors are paid by the
later investors. But the Ponzi can go on a long time and Italy can
be bailed out by the ECB — and in the meantime corporate profits
are brisk.
To my old and possibly failing eyes, we seem to be in a
panic manufactured by speculators, fed by the media, poisoning the
hopes and plans of the whole world.
The leading clue is the stupefying rise of gold, which
simply bears no relation to any traditional metric. Gold buying
panics are sometimes — not always — signs of a manufactured
panic, just as any buying panic in a commodity is.
But the most astonishing part of the whole dreary tableau
is the utter irrelevance of President Obama. He cannot do anything
about anything. He might as well be on the moon. The gunslingers on
Wall Street and in London and Hong Kong and Tokyo have made him
absolutely outer planetary. It’s almost sad. He’s flailing his arms
around, and no one is listening. He might as well be President of
The Off World Colonies. “Yes, we can….we can be utterly
irrelevant.”
These are strange times. Up here at Lake Pendoreille
though, it’s paradise. The moon shines on the water. The osprey
slide through the air, and the freight trains shake the walls. Far
from Broad Street, all is well.
