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The direction stock markets have been taking lately has caused hysteria in the media...almost as hysterical as chickens running with their heads cut off. What can one make of this?
Posts: 7516 | From: Somewhere on Earth | Registered: Jan 2008
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There are 2 markets in the capitalist market system: equity and bond. Equities apply to stocks and their values. With a bad economic situation caused by a lack of effective demand companies have to lay off and downsize. When this happens stock values fall and owners sell off--at a loss. So trillions can be lost in just one day.
The sell-off ceases when stocks are sufficiently cheap for traders to buy them. But they are nervous because prices can fall even further. So any bit of news--positive or negative--can lead to panic selling.
But the problem will persist because the fundamentals are bad. The problem is lack of effective demand. Solution: Keynesian solutions. But the right wingers and "small government" fanatics just don't want to hear that kind of thing.
Businesses don't want to hire because they don't see profits. So government must step in and fund expenditures that would employ people. So more government spending(fiscal) would involve more taxes at which the wealthy scream "bloody murder". Or the government can engage in "quantitative easing" which means "printing money"--i.e. selling bonds to get cash. But selling bonds is just a way to increase debt.
Solution: nationalise the banks and write off debt to the banks plus writing down private debt--credit cards, etc. Just write off those debts and let the banksters squeal. Plus reduce mortgages by the percentage reduction in the value of the real estate item. But it won't happen in a capitalist society--where banks and big money have the final say. So more of the same to follow.
Amazing claim: the U.S. is touted as the "richest country in the world" yet 46% of its population is on subsidised consumption(food stamps).
Posts: 5492 | Registered: Nov 2004
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