We did a post last week concerning the July 24 prediction made by Secretary of the Treasury, Timothy Geitner, that, if a “debt ceiling” deal wasn’t reached that afternoon, our stock markets would tumble dramatically on Monday, July 25. The DOW did fall by 88 that Monday. Certainly not good, but hardly the calamity predicted.
During the ensuing week, we received many comments, with some giving us a daily review of each day’s DOW closing average. The DOW declined every day that week, but the worst decline was Tuesday, August 2 when the average closed down by 266.
If Mr. Geithner was correct, and the DOW would react to our failure to raise the debt ceiling, why did the DOW’s worst day happen after we raised the debt ceiling?
I am definitely not an expert on this subject, but, a few things come to mind. The market was not so much concerned about our debt ceiling, but, about our debt. The “deal” did little about that. The President can freely spend $2.4 trillion in the next 18 months over and above what the government collects in taxes, taking our overall debt up to almost $17 trillion. Why would that cheer the markets?
Any spending cuts that would measurably lower any annual deficits, will not happen now, but, years from now, if at all. Why would that cheer the markets?
Unemployment is still “unexpectedly” above 9%.
Businesses are not hiring…what’s the cost of Obamacare, what’s the cost of new EPA regulations, will the NLRB prohibit unionized businesses from relocating to “right to work” states, will the expiration of the Bush tax cuts require my business to pay more taxes 17 months from now?
If we do not get our spending under control now, and reduce uncertainty for business, we will never have a fix.