As one would expect, yesterday’s stock market plunge elicited a broad response. Here are a few of the first-responders whose comments were mostly directed towards the United States:
Paul Krugman wrote an “I told you so” column:
In case you had any doubts, Thursday’s more than 500-point plunge in the Dow Jones industrial average and the drop in interest rates to near-record lows confirmed it: The economy isn’t recovering, and Washington has been worrying about the wrong things.
It’s not just that the threat of a double-dip recession has become very real. It’s now impossible to deny the obvious, which is that we are not now and have never been on the road to recovery.
Steve Pearlstein asked: “Why is this happening?” His “Short answer: Because we never really fixed underlying structural problems in the U.S. and global economies that had been building for decades and caused the financial and economic crisis in 2008.” (Pearlstein then goes on to recommend an IMF-style structural adjustment program for the United States, a policy choice that, if implemented, would turn a tragedy into a global catastrophe.)
Martin Weisberg looked at America, specifically, at Washington, DC, and found a political catastrophe that will have enduring economic consequences:
It is difficult to remember a more dismal moment in American politics. The debt ceiling crisis and the agreement that ended it point to deep dysfunction in our system. In a variety of ways, the episode portends continued short-term economic misery and long-term national decline. It is as if the US chose at the last minute not to commit financial suicide — but only out of preference for a slower, more excruciating form of self-destruction.
The crisis has, however, been clarifying in several respects. We can now say with some confidence that Washington will be doing nothing more to help the ailing economy. President Barack Obama is trying to push an employment agenda. But for the federal government to spur growth or create jobs, it has to spend additional money. The antediluvian Republicans who control Congress do not think that demand can be expanded in this way. They believe that the 2009 stimulus bill, which prevented an even worse economy over the past two years, is responsible for the current weakness. Their approach of depression economics — embedded in the debt ceiling compromise — demands that we address the risk of a double-dip recession by cutting public expenditure immediately.
So instead of trying to pull out of the stall, the US economy will simply have to absorb whatever blow is coming.
Ezra Klein made these remarks about the clarity of vision found within America’s Versailles on the Potomac:
A dramatic gap has opened between the economy as Washington sees it — and wants to intervene in it — and the economy that exists. Whatever weak recovery we might have hoped for is being hindered by global commodity prices, consumer deleveraging, fears of flagging demand in emerging markets, earthquakes in Asia and much more. Globally, it’s been an almost uninterrupted run of crises and bad luck. Meanwhile, Washington just spent two months arguing over whether it would pay its bills or spark an unnecessary financial crisis.
I confess that I find it difficult to avoid spoiling myself with a bit of Schadenfreude over this recent stock market outcome. I have indulged myself because the stock market plunge aptly punctuates the ridiculous political calamity that was the Debt Ceiling Debate. The political elite wanted us to believe that addressing the deficit by cutting spending during a recession was the reasonable, adult and necessary solution for the country to adopt. Nevertheless, the stock market concluded otherwise. Market instability such as this brings with it a portentous expectation of another recession in the United States and around the world. Life could become riskier and harsher than it had been if another recession follows. Disaster capitalism indeed.
In conclusion, I will quote Bill Mitchell who stated what ought to be obvious to everyone but which is mostly ignored in the classless society found the United States:
My phone has been ringing a lot with journalists seeking my views on what is going on and radio stations lining up interviews and “news grabs”. There is a sense out there that we are sliding backwards quickly into financial collapse and recession. I sensed some panic today among the press. And they won’t believe me when I tell them it is a crisis but a totally confected crisis that has origins in class conflict (the top-end-of-town seeking ways to get more of the real output for themselves).