CNN/Money‘s reasons for Friday’s plunge in the markets?
- The Fed may raise its core interest rates, in order to fight inflation brought on by the new tax law.
- This will also cut into corporate profits.
- They claim worries about the bond market. I don’t do bonds, but it sounds like the price of bonds may drop soon due to a “glut” of them because of increased government borrowing.
- UGLY POLITICS!
- The markets have been on a bull run for far longer than normal, and some investors are getting jumpy, waiting for the inevitable 10% drop.
I’m not quite sure what to think of this. The swiftly deteriorating democratic institutions of the leading economic powerhouse should be of concern to every investor world-wide. Their wealth, real and potential, is at risk when the trust we have in those institutions is threatened. If they choose to be worried about the GOP’s attacks on some of the most fundamental institutions of the United States – not only the FBI, but the judiciary as well – then we may see a helluva pullout.
And, in a way, that may be a political stabilization mechanism. If the President takes actions which destabilize the markets and threaten our prosperity, the immediate market signal may be the trigger we need. It’ll be the modern-day equivalent of the villagers with the pitchforks and torches, as the political class ejects the person doingthe damage to the system.
So long as it’s all theoretical, the GOP will sit on its hands. Its members are simply not bright enough to take necessary actions as a group. Sure, some are planning to retire, but that’s because they can’t see themselves doing much beyond that. But once the edge of chaos suddenly appears to them and their donors, it may become an entirely new scenario – with one expendable actor available.
Maybe. All hand waving here, as always.
