Nel's New Day

March 9, 2020

Markets—Stocks, Bonds, Oil—in Crisis

Reminiscent of the 2008 crisis, a full-flown trading panic sent the New York Stock Exchange shooting downwards as the Dow Jones dropped over 2,000 (7.8 percent) to the same level as 30 months ago, and the Standard & Poor and Nasdaq each lost over 7 percent. The radical drops during the first few minutes after the bell rang to open stock trading caused a 15-minute trading hiatus for all trading. The automatic trigger mechanism was created during the 1987 recession, and it’s only the second time since then that the stoppage has gone into effective, the last time in 2008 during the Great Recession. It’s the first time since 2008, during The Great Recession, that the trigger mechanism was utilized.  [Floor trader Peter Tuchman watches the stock numbers drop during the opening bell on the New York Stock Exchange on March 9, 2020. Timothy A. Clary/AFP via Getty Images.) 

The losses were predictable. Global markets began shrinking over the weekend, setting up the scene for the losses in the U.S. London’s FTSE returned to three years ago by falling 8 percent, Japan’s Nikkei index went down over 5 percent, and Australia’s stocks lost over 7 percent.

Bonds also hit an historic low as investors sold stocks to because of covid-19 and the oil war. All yields fell below 1 percent for the first time ever: the 10-year Treasury bond is 0.62 percent, and the 30-year yield dropped almost 2 percent to crawl back up to 1.08 percent. 

 

 

 

 

 

The covid-19 pandemic has roiled the global markets, but the slumps were also caused by Saudi Arabia’s initiating an oil war with Russia which caused prices to collapse 30 percent to the level of the 1991 Gulf War. Despite a glut of oil on the market, the Saudis won’t scale back production after Russia flooded the market. Finishing down 24 percent, Brent was $34.44 per barrel and West Texas International crude at $31.13 per barrel. Dictator Donald Trump (DDT) blew aside the destructive impact from uncertainty and fear by praising oil prices to save money at the gas pump. Lower oil prices also slash inflation that may match the 2008 financial crisis.

Last Friday, Russia refused an agreement with OPEC on cuts in oil supplies to bolster prices. Price drops hurt Venezuela and Iran, already suffering from U.S. sanctions. Highly indebted U.S. oil companies will have added pressure, and more of them may go out of business with ensuing decline in production. Oil producing states such as Texas have laid off workers. Canada will be hard hit, and developing companies such as Nigeria, Angola, and Brazil will face economic slowdowns. Shares of the Saudi national oil company, Saudi Aramco, dropped by 9 percent. If the Saudis increase output to make up for lower prices, prices in the world will continue to collapse, already about one-third this year.

Last week,  J.P. Morgan told clients that markets indicate a 90 percent chance of a recession, meaning six continuous months of economic contraction. Hits to the economy come from almost empty airplanes and hiring freezes. Middle-class people will stay at home to eat instead of patronizing restaurants and buy cheaper products.

DDT keeps talking about how strong “the economy” is, but people’s economic life and livelihood are not “the economy.” DDT’s policies on taxes, tariffs, education, healthcare, the environment, etc. have badly hurt most people’s finances. The 34 percent addition to the deficit negates the idea that the economy is booming, as are the frequent drops in the prime rate. Since his inauguration, DDT has run the government as if the U.S. was already in a recession. Education enriches the economy, but it’s cut in DDT’s budget as are service. Taxpayers have already paid $28 billion to bail out farmers because of DDT’s tariffs, and DDT wants to take the Affordable Care Act away from most people in a case before the Supreme Court. Climate change takes more money from taxpayers, but DDT and his administration ignore its problems of floods, wildfires, hurricanes, and tornadoes. The economy hurts most people.

Years before the 2008 financial crisis, Sen. Elizabeth Warren (D-MA) warned about a vulnerable economy with trends of “shady subprime lending, rising household debt, a mortgage market where lenders didn’t bear the risk of their loans.” [Note: I sensed disaster coming too, but I’m not an expert.] Warren wrote another post less than a year ago about an eminent disaster:

“I see a manufacturing sector in recession. I see a precarious economy that is built on debt—both household debt and corporate debt—and that is vulnerable to shocks. And I see a number of serious shocks on the horizon that could cause our economy’s shaky foundation to crumble. Seventy-one million American adults—more than 30% of the adults in the country—already have debts in collection.”

She added that consumers were getting squeezed by “a generation of stagnant wages” and the rising costs of basic goods and services. The solution for U.S. households is to take on debt at historic levels with student loans, credit card debt, auto loans. Warren also wrote about corporate debt:

“Leveraged lending—lending to companies that are already seriously in debt—has jumped by 40 percent since Trump took office.”

This leveraged debt helped consumer debt to tank the economy in 2008. Like subprime mortgages, new corporate loans are “poorly-underwritten loans with minimal protections that are then packaged and sold to investors.”

The recession for U.S. manufacturing sector, tied to DDT’s trade wars, began in the beginning of 2019. Warren wrote, “For the first time ever, the average hourly wage for manufacturing workers has dropped below the national average.” Her solution was reducing household debt by canceling some debt and raising the minimum wage to $15 per hour; creating regulations to decrease heavily leveraged corporate lending; and investing trillions of dollars into new environmental research, production, and exports to strengthen manufacturing.

Instead, DDT kept wages low, blocked regulations, stopped investing in the country, and cut taxes for the wealthy and big business.

DDT is fond of comparisons to him with biblical figures such as Cyrus, David, Abraham, Moses, the apostles, Jesus, and even Queen Esther. Running out of Judeo-Christian figures, DDT quote-tweeted an image of himself as Nero and wrote, “Who knows what this means, but it sounds good to me!” Former ethics director Walter Schaub replied:

“It means Rome is burning and you’re fiddling around a golf course, Nero.”

When he was young, the emperor Nero had lavish palaces, threw wasteful parties, slept around, and went on the stage. In 64 A.D., he announced his plan to destroy Rome and build it back up in his preferred architectural style. The Senate refused, and Rome began to burn for nine days. According to legend, the extravagant emperor Nero “fiddled while Rome burned,” but violins didn’t come into existence until many centuries later. Nero’s first biographer claimed he sang while Rome burned. Other biographers asserted that witnesses saw Nero set the fire or hired thugs to do it. Nero committed suicide four years later after fleeing Rome and discovering that he was condemned to death as a public enemy. The people celebrated his death. [Left: A float depicting DDT as Nero in the traditional Carnival parade in Mainz, Germany, on Feb. 24. Michael Probst/AP]

The United States is burning, and DDT plays golf and blames the Democrats.

Leave a Comment »

No comments yet.

RSS feed for comments on this post. TrackBack URI

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Mind-Cast

Rethinking Before Restarting

the way of improvement leads home

reflections at the intersection of American history, religion, politics, and academic life

© blogfactory

Genuine news

Civil Rights Advocacy

Never doubt that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has. -- Margaret Mead

AGR Daily News

Transformational News; What Works For Seven Future Generations Without Causing Harm?

JONATHAN TURLEY

Res ipsa loquitur - The thing itself speaks

Jennifer Hofmann

Inspiration for soul-divers, seekers, and activists.

Occupy Democrats

Progressive political commentary/book reviews for youth and adults

V e t P o l i t i c s

politics from a liberal veteran's perspective

Margaret and Helen

Best Friends for Sixty Years and Counting...

Rainbow round table news

Official News Outlet for the Rainbow Round Table of the American Library Association

The Extinction Protocol

Geologic and Earthchange News events

Social Justice For All

Working towards global equity and equality

Over the Rainbow Books

A Book List from Gay, Lesbian, Bisexual, and Transgender Round Table of the American Library Association

The WordPress.com Blog

The latest news on WordPress.com and the WordPress community.

%d bloggers like this: