US stock marked plummet, whats is going on?

[spanky4ever]

Dow Jones dropped another 2,91% today, and Trump is sitting in the White House, saying he is all alone, waiting for the Democrats to come back and negotiate for the wall, and he tweets "poor me". I think he really has lost it, and he def is a man in distress and way over his head by the mess he has made. When will the Republicans finally use the 21st amendment? I think Trump is so stressed about the Muller investigation (rumors say the report could be finished in February) that he finally have lost it completely.
How will that affect the downturn on the stock market? I would guess it will drop even further?

@Amsel_ saying that everything is just going well with the fundamental economy? I would say that nothing fundamental has changed since the financial crash in 2008. Maybe you know something that I do not? Most ppls purchasing power has not gone up, even though the super-rich has gone even more super rich, but there is only so many lobsters and caviar you can eat, and only so many mansions and big boats you want to own.

[Amsel_]

Can't believe I almost forgot to wish you guys a Merry Christmas!

It's always funny when people try to rationalize the inherently irrational. It can go up, down or sideways!

Weren't you just saying that I was in denial for saying this isn't a crash, and the market would recover? Now suddenly the market is irrational, and could go in any direction; therefore, meaning that it very well could go back up.

@Amsel_ saying that everything is just going well with the fundamental economy? I would say that nothing fundamental has changed since the financial crash in 2008. Maybe you know something that I do not? Most ppls purchasing power has not gone up, even though the super-rich has gone even more super rich, but there is only so many lobsters and caviar you can eat, and only so many mansions and big boats you want to own.

Wealth inequality isn't too big of a deal for macroeconomics. Our big problem is a looming private debt issue. Private debt is typically the most likely cause of recession in post-war countries. This is something I'm worried about in the long term, but not now. The money supply is increasing at a non-deflationary rate thanks to the government's increasing deficits and rising lending to the private sector. I just don't see a recession in the economy. I stand by my belief that this is a short to medium term speculative issue, and we will see a recovery within the next few months.

[spanky4ever]

merry x-mas to you to @Amsel_
I agree that the debt is a big problem - and not only for you guys in USA, its pretty much a global issue. The ppl are in debt and the nations as well, meaning that if we have another global meltdown like the one in 2008, nations just cannot borrow like they did, trying to get us out of the problems it caused. But as I said, I cannot see any fundamental changes to the problems that caused the latest crash.

Btw, I do think the wealth inequality is at the core of the problem - if there is no demand because ppl cannot buy your stuff anymore, the eco will suffer, and the rich ppl will also suffer in the long run - and down we go again. The wealth inequality we have now is just not sustainable!

We have never been very good at predicting what will cause a crash (history tell us this), it could be the debt, or it could be some nation economy crashing, taking the rest of us down the drain. The global economies are so intertwined, that one nation fall, have the power of making a domino effect and take other nations down with them. Plenty of examples for this in the last decades.

What is really scary now, is the trade wars, and the effect it has on the global economy. This is something we have not seen in the scale we have now, and its caused by one madman in the white house. I mean, he has crashed his own eco by going bankrupt 6 times before, the only diff is he is playing with us all now.
The reason why we do so poor at predicting the next crash is that it has so multiple causes, but the result is the same.
I am really worried now because there are so many dark skies gathering. The biggest one is your POTUS, and he should be removed yesterday.

[fightinfrenchman]

merry x-mas to you to @Amsel_
I agree that the debt is a big problem - and not only for you guys in USA, its pretty much a global issue. The ppl are in debt and the nations as well, meaning that if we have another global meltdown like the one in 2008, nations just cannot borrow like they did, trying to get us out of the problems it caused. But as I said, I cannot see any fundamental changes to the problems that caused the latest crash.

Btw, I do think the wealth inequality is at the core of the problem - if there is no demand because ppl cannot buy your stuff anymore, the eco will suffer, and the rich ppl will also suffer in the long run - and down we go again. The wealth inequality we have now is just not sustainable!

We have never been very good at predicting what will cause a crash (history tell us this), it could be the debt, or it could be some nation economy crashing, taking the rest of us down the drain. The global economies are so intertwined, that one nation fall, have the power of making a domino effect and take other nations down with them. Plenty of examples for this in the last decades.

What is really scary now, is the trade wars, and the effect it has on the global economy. This is something we have not seen in the scale we have now, and its caused by one madman in the white house. I mean, he has crashed his own eco by going bankrupt 6 times before, the only diff is he is playing with us all now.
The reason why we do so poor at predicting the next crash is that it has so multiple causes, but the result is the same.
I am really worried now because there are so many dark skies gathering. The biggest one is your POTUS, and he should be removed yesterday.

Can you agree that things would be less scary if HIllary were president?

[spanky4ever]

we will never know @fightinfrenchman she may have attacked Iran already, burning the rest of the middle east. But then again, what can be crazier than Trump? I would say that is a low bar.

You should aim for something better
(whispering Sanders 2020 )

[Amsel_]

merry x-mas to you to @Amsel_
I agree that the debt is a big problem - and not only for you guys in USA, its pretty much a global issue. The ppl are in debt and the nations as well, meaning that if we have another global meltdown like the one in 2008, nations just cannot borrow like they did, trying to get us out of the problems it caused. But as I said, I cannot see any fundamental changes to the problems that caused the latest crash.

Btw, I do think the wealth inequality is at the core of the problem - if there is no demand because ppl cannot buy your stuff anymore, the eco will suffer, and the rich ppl will also suffer in the long run - and down we go again. The wealth inequality we have now is just not sustainable!

We have never been very good at predicting what will cause a crash (history tell us this), it could be the debt, or it could be some nation economy crashing, taking the rest of us down the drain. The global economies are so intertwined, that one nation fall, have the power of making a domino effect and take other nations down with them. Plenty of examples for this in the last decades.

What is really scary now, is the trade wars, and the effect it has on the global economy. This is something we have not seen in the scale we have now, and its caused by one madman in the white house. I mean, he has crashed his own eco by going bankrupt 6 times before, the only diff is he is playing with us all now.
The reason why we do so poor at predicting the next crash is that it has so multiple causes, but the result is the same.
I am really worried now because there are so many dark skies gathering. The biggest one is your POTUS, and he should be removed yesterday.

Government debt is different from private sector debt. The United States government can borrow just like they did in 2008. They can borrow a lot more. There's no limit to their expenditure other than inflation. The concern with private debt is that banks have a fairly low equity on their balance sheet relative to deposits and loans, so it only takes a fairly minor amount of loans going insolvent to crash the entire ship. Loans are also part of the money creation process, so bankruptcy or even just a slowing down of lending to the private sector can constrict the money supply and cause an economic slowdown.

Also I agree with you on the importance of consumer purchasing power. I'm just saying that wealth inequality is more of a political issue than an economic one.

[Dolan]

The United States government can borrow just like they did in 2008. They can borrow a lot more. There's no limit to their expenditure other than inflation.

Then why is Trump seeking approval by Congress for a mere sum of 5.7bn dollars to build his wall? Surely if he had discretionary spending powers he wouldn't have to wait on decisions made by another institution.

[Snuden]

Send eco theory ASAP!

[Snuden]

Yea, it seems like Trump have totally lost it. Tweeting more nonsense than ever before.

Kek.

[Goodspeed]

Also I agree with you on the importance of consumer purchasing power. I'm just saying that wealth inequality is more of a political issue than an economic one.

Except more wealth inequality means there is effectively less purchasing power. I know the average PP stays the same but the rich are much more likely to invest their money and just let it sit. Much less money will be spent on things people don't need.

I've had people say stuff like this every single time the DOW went down by 500-1000 points.

It went down 4000 and futures indicate it will go down further. This isn't just stocks having a bad day. Could still be just a correction, but I wouldn't be too quick to classify this as a "buying opportunity" myself.

I think Mnuchin's questionable press release awoke a lot of fear in stock holders, who were already wavering. He talked about banks having plenty of liquidity and no solvency issues with the implication that even if the recession is around the corner, banks would be okay. And even if he's not worried about that he would've still looked into it, sure, but to make that the main point of your press release? Means he's either very worried or stupid. Either way, the market's reaction makes sense.

It's always funny when people try to rationalize the inherently irrational.

People like to call the market irrational and I get where they're coming from and all but there is obviously rationality in there. After all it went down during the 2008 crisis, and now is going down as a perfectly rational reaction to Trump's ridiculous trade policy, his administration falling apart, the Fed announcement, and Mnuchin's press release. Yes, there are periods where stocks are overbought or on sale, but long term it compensates.

[deleted_user0]

rationality is an empty buzzword, everything that isn't completely random has some sort of rationality. Or, at least, we can rationalize anything that isn't 100% random. This doesn't mean it's rational. Then there's also the case of people acting rational, though nonetheless the framework in which they operate might not be rational. Man in nature might be rational, this doesn't mean nature itself is rational.

In any case, none of my previous responses in this thread were very serious.

[Amsel_]

The United States government can borrow just like they did in 2008. They can borrow a lot more. There's no limit to their expenditure other than inflation.

Then why is Trump seeking approval by Congress for a mere sum of 5.7bn dollars to build his wall? Surely if he had discretionary spending powers he wouldn't have to wait on decisions made by another institution.

Trump is the head of state, but not the entire government. The congress has the power of the purse, according to Article 1, Section 8, Clause 1 of the U.S. Constitution.

"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;"

I don't know if you remember this, but several years back there was an argument over the "fiscal cliff." (the limit on the amount of debt the United States can incur) You can get a summary about it here: https://en.wikipedia.org/wiki/United_St ... scal_cliff But anyways, the deficit has gone up trillions since then. Political fights are different from economic reality.

[Amsel_]

Except more wealth inequality means there is effectively less purchasing power. I know the average PP stays the same but the rich are much more likely to invest their money and just let it sit. Much less money will be spent on things people don't need.

You're absolutely right. I'm just saying that economically we shouldn't focus too much on lowering inequality, and instead try to find ways to raise consumer purchasing power. Coming at this discussion from a question of the haves and have-not's tends to make the discussion more about emotion than economics, and it gives off the impression that wealth is a zero-sum game. The question should be "How do we strengthen the middle and working classes?" not "How do we give rich people's money to poor people?"

I think Mnuchin's questionable press release awoke a lot of fear in stock holders, who were already wavering. He talked about banks having plenty of liquidity and no solvency issues with the implication that even if the recession is around the corner, banks would be okay. And even if he's not worried about that he would've still looked into it, sure, but to make that the main point of your press release? Means he's either very worried or stupid. Either way, the market's reaction makes sense.

I'm guessing it's stupidity. He spent decades at goldman-sachs, so I don't doubt that he's intelligent in regards to securities markets. But the guy doesn't come across as the right person to be in charge of macroeconomic issues. He's only in the position because he worked with Trump's campaign.

[Dolan]

Trump is the head of state, but not the entire government. The congress has the power of the purse, according to Article 1, Section 8, Clause 1 of the U.S. Constitution.

"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;"

Do you mean that the Congress, which I assume to be the legislative power in the US, is also half of the executive power? That's very unusual. I would assume that the separation of powers in the US is the same as in every other modern democracy. Ie, the legislative power makes laws (including the law on budgetary exercise) and the government implements those laws (including the budget law). So logically there shouldn't be anything unusual here. I only took issue with your statement that there's no limit to how much the US government can spend, which didn't seem to be in accordance to US law. As far as I know, the Congress, ie the legislative power, decides how much the US government spends and that's just how legislative power works, it doesn't mean that the Congress somehow also has executive powers. A member of the Congress can't go to a random federal agency and start giving orders to civil servants, as far as I know, because it has no executive power. It can only make the laws which govern those agencies. So I suppose, the US government can't really spend as much as it wants, as you claimed, it has to spend as much as the Congress (the legislative power) allows it to.

I don't know if you remember this, but several years back there was an argument over the "fiscal cliff." (the limit on the amount of debt the United States can incur) You can get a summary about it here: https://en.wikipedia.org/wiki/United_St ... scal_cliff But anyways, the deficit has gone up trillions since then. Political fights are different from economic reality.

Yes, I am very much aware of that budgetary crisis that happened during Obama's second mandate. Which is weird, because, back then it was the (Republican) Congress that was threatening to close the government by not raising the debt limit, while now it's the head of the government who is threatening to close his own government. Not sure I've ever seen such a measure in any first world country: a government threatening to shut down its own administration over one particular expense.
Really makes you think, why would the Congress make such a fuss about money that can be just brought into existence at will, it's just an accountancy trick. So why not approve whatever amount of money the government wants to spend? Heck, why not just put that in law, why keep the government's spending powers tied to legislative control? Because you claimed that the US government can spend as much as it wants, but it seems that it can only get that "as much as it wants" in small chunks, depending on the good will of the Congress. Surely there must have been some logic to this interplay between powers...

[fightinfrenchman]

Surely there must have been some logic to this interplay between powers...

I see you haven't met the Republican party

[Amsel_]

Trump is the head of state, but not the entire government. The congress has the power of the purse, according to Article 1, Section 8, Clause 1 of the U.S. Constitution.

"The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States;"

Do you mean that the Congress, which I assume to be the legislative power in the US, is also half of the executive power? That's very unusual. I would assume that the separation of powers in the US is the same as in every other modern democracy. Ie, the legislative power makes laws (including the law on budgetary exercise) and the government implements those laws (including the budget law). So logically there shouldn't be anything unusual here. I only took issue with your statement that there's no limit to how much the US government can spend, which didn't seem to be in accordance to US law. As far as I know, the Congress, ie the legislative power, decides how much the US government spends and that's just how legislative power works, it doesn't mean that the Congress somehow also has executive powers. A member of the Congress can't go to a random federal agency and start giving orders to civil servants, as far as I know, because it has no executive power. It can only make the laws which govern those agencies. So I suppose, the US government can't really spend as much as it wants, as you claimed, it has to spend as much as the Congress (the legislative power) allows it to.

I don't know if you remember this, but several years back there was an argument over the "fiscal cliff." (the limit on the amount of debt the United States can incur) You can get a summary about it here: https://en.wikipedia.org/wiki/United_St ... scal_cliff But anyways, the deficit has gone up trillions since then. Political fights are different from economic reality.

Yes, I am very much aware of that budgetary crisis that happened during Obama's second mandate. Which is weird, because, back then it was the (Republican) Congress that was threatening to close the government by not raising the debt limit, while now it's the head of the government who is threatening to close his own government. Not sure I've ever seen such a measure in any first world country: a government threatening to shut down its own administration over one particular expense.
Really makes you think, why would the Congress make such a fuss about money that can be just brought into existence at will, it's just an accountancy trick. So why not approve whatever amount of money the government wants to spend? Heck, why not just put that in law, why keep the government's spending powers tied to legislative control? Because you claimed that the US government can spend as much as it wants, but it seems that it can only get that "as much as it wants" in small chunks, depending on the good will of the Congress. Surely there must have been some logic to this interplay between powers...

There are three branches of government: Executive, Legislative, and Judicial. So when you say something like "I suppose, the US government can't really spend as much as it wants, as you claimed, it has to spend as much as the Congress (the legislative power) allows it to." it just comes across as silly. The legislature is part of the government. If it doesn't agree with expenditure then the government doesn't agree with it. If the legislature agreed to the spending then it would mean the government is willing to spend that money. These debt limits are self-imposed. If the government - the executive, legislative, and judicial - all agreed to spend any amount of money then they could. Their only real economic constraint is inflation. Their only political constraints are ones that they impose on themselves for whatever reason. If the government (which includes the legislature that sets the debt ceiling) agrees to constrain its spending through those, then it obviously does not agree to that spending.

[Dolan]

Well, using the word government to include all the powers of the state is yet another case of "American exceptionalism". This is not how the word is used in Europe. Here when we talk about the government we specifically refer to the executive power, the cabinet of ministers. Nobody here ever uses the word government to refer to law courts or the parliament. That is unheard of.

The only case in which we would be using the most generic meaning of "government" (which includes all state powers) would be when we talk about forms of government, like democracy, dictatorship, monarchy etc.

Nobody in France or the UK would ever talk about "government" and think of their legislative power (parliament)... That's just... so special.

[spanky4ever]

can I ask you this @Amsel_ did you vote for Trump, and are you still thinking he is a making America Great Again?

[spanky4ever]

https://youtu.be/COQ0QrCn-vU
MAGA MAN

[Amsel_]

We're up over 500 points today.

Well, using the word government to include all the powers of the state is yet another case of "American exceptionalism". This is not how the word is used in Europe. Here when we talk about the government we specifically refer to the executive power, the cabinet of ministers. Nobody here ever uses the word government to refer to law courts or the parliament. That is unheard of.

The only case in which we would be using the most generic meaning of "government" (which includes all state powers) would be when we talk about forms of government, like democracy, dictatorship, monarchy etc.

Nobody in France or the UK would ever talk about "government" and think of their legislative power (parliament)... That's just... so special.

Oh that's an easy mistake to make. I forgot that in parliamentary governments there's a process of "forming a government." https://www.politico.eu/article/sweden- ... overnment/ But this governmental process of separation of powers is actually fairly common. The French Constitution mentions it explicitly: "Any society in which no provision is made for guaranteeing rights or for the separation of powers, has no Constitution." I'm sure if you went into the streets and said "I am going to overthrow the government" people would know that you're going to get rid of the parliament, and you're not just protesting against the prime minister/president.

[Amsel_]

can I ask you this @Amsel_ did you vote for Trump,

no

and are you still thinking he is a making America Great Again?

I like that he's peaceful on foreign policy, and he's done a good job with judges, but there's still a lot to be desired. I think the labor participation rate is actually down a bit since 2016. (which is different from the official unemployment statistics) Both the republican immigration reform bills failed because for some reason they were both presented at the same time, which split the vote. No major infrastructure projects. No new healthcare law. Nothing done about tech censorship. But he's done some other less tangible good things. Nearly all the political capital in the country was expended attacking him, and now very few people trust the media and figureheads anymore. He also brought back a working class tone to the republicans, which they haven't seen in awhile. I'm really hoping this takes off, and they don't just drift back into neoconservatism.

[Dolan]

Oh that's an easy mistake to make. I forgot that in parliamentary governments there's a process of "forming a government." https://www.politico.eu/article/sweden- ... overnment/ But this governmental process of separation of powers is actually fairly common. The French Constitution mentions it explicitly: "Any society in which no provision is made for guaranteeing rights or for the separation of powers, has no Constitution." I'm sure if you went into the streets and said "I am going to overthrow the government" people would know that you're going to get rid of the parliament, and you're not just protesting against the prime minister/president.

Usually, in European countries, governments are the product of a parliamentary majority. That's how they are formed, in the first place. After elections, parties start negotiating on forming a new political majority and once they agree on a common platform, they appoint a prime minister. Then they hold a vote in plenary session and if their government/cabinet wins that vote, it officially becomes the new government of that country.

No, actually when people protest against the government here, they are clearly protesting against the cabinet (prime minister and his team of ministers).

A protest against the parliament wouldn't make much sense, since it's directly elected. So, if you have something against the parliament, all you have to do is just participate in elections and your input will be reflected in the resulting new parliament. We never use the word "government" here to refer to anything but the prime minister and his cabinet.

[Amsel_]

CUT MY LIFE (savings) INTO PIECES.

But seriously. I'm not too concerned. There's plenty of news that would explain this downturn: rate hikes, trade concerns, political instability (both Trump's cabinet chaos and the democrats who are perfectly fine with a prolonged shutdown so long as they don't have to compromise on their politics), quite a few company-specific scandals too. But spending and lending have both been rising. I don't think the economy itself is having any troubles. This is just a speculative issue. It's like if you have a sports car that's making a weird noise. Some people are going to think the engine is a dud and laugh at the person who bought the car; others are going to see the potato in the tail pipe.

We've been afraid of a recession for the past year now. I think this bearish tone has been giving us natural corrections over the slightest of things. People aren't acting like they do just before a bubble-pop or whatever. They're still risk-adverse. So fundamentally I think the economy is going strong, and it will recover shortly. Though, I do hope the next congress takes this as a sign to pass more infrastructure and/or tax-cuts to stimulate the economy further. There's still a lot of room for growth.

Stage: Denial.

[deleted_user0]

CUT MY LIFE (savings) INTO PIECES.

But seriously. I'm not too concerned. There's plenty of news that would explain this downturn: rate hikes, trade concerns, political instability (both Trump's cabinet chaos and the democrats who are perfectly fine with a prolonged shutdown so long as they don't have to compromise on their politics), quite a few company-specific scandals too. But spending and lending have both been rising. I don't think the economy itself is having any troubles. This is just a speculative issue. It's like if you have a sports car that's making a weird noise. Some people are going to think the engine is a dud and laugh at the person who bought the car; others are going to see the potato in the tail pipe.

We've been afraid of a recession for the past year now. I think this bearish tone has been giving us natural corrections over the slightest of things. People aren't acting like they do just before a bubble-pop or whatever. They're still risk-adverse. So fundamentally I think the economy is going strong, and it will recover shortly. Though, I do hope the next congress takes this as a sign to pass more infrastructure and/or tax-cuts to stimulate the economy further. There's still a lot of room for growth.

Stage: Denial.

[Amsel_]

I'm just teasing.