Why the Stock Market Dropped

August 4, 2011

So after weeks of telling us that we were on the brink of catastrophe (again) unless Congress passed an increase of the spending limit, including a decrease in our bond rating, Congress blinked (as they always do) and passed the increase. So the market promptly dropped over 500 points in a day to close lower than it had in 8 months. And today the rumor is that S&P will downgrade our debt anyway.
This is not a big surprise to many intelligent people – none of whom are part of the MSM. The problem with our country is that we are spending more than we can take in, (note that I don’t say earn.) not that we were in danger of defaulting on our debt. This was the best time to actually address the problem. Unfortunately, with Democrats holding both the Senate and the White House - and the Tea Party Republicans vowing not to vote for any new “revenue” – there was no chance to reducing spending OR EVEN TO NOT SPEND MORE NEXT YEAR THAN THIS YEAR.
Many congressmen finally figured out that it wasn’t going to happen now, so they settled for the best that they could get – which was no new taxes. Period. The good part of this is that it gives us a chance to elect even more responsible congressmen and senators next year who will reduce spending. Unfortunately, there does not appear to be any suitable Republican presidential candidate who will act on this. Sarah Palin, Ron Paul, and Michele Bachman all appear to have the right attitude, but it is extremely unlikely that any of them could be elected – even if Obama runs for re-election. Pawlenty and Santorum can’t get any visibility. Gingrich and Cain have blown any chances they had. That leaves us with either Mitt Romney or Texas governor Rick Perry, who is increasingly appearing to be the only decent candidate on the Republican side.
So there are 3 types of people – those who wanted us to decrease the deficit by raising taxes, those who want to drastically decrease spending, and those who want ever more government hand-outs paid for with OPM (Other People’s Money). None of them are happy with this deal, which is why we’re seeing such panic in the markets. Our only hope is that enough people are responsible enough to ignore the inevitable character assassinations and vote in fiscally (and ethically) responsible representatives in 2012.

Update August 6,2011
Well the S&P has now downgraded our debt. Resisting saying that this smacks of the kettle calling the pot black - what does this matter? Any one not in a coma knows that our economy is way overextended and nothing in the debt raise bill changes anything about that. Although some may be caught off guard, the vast majority if the "smart" money has already factored in any further downgrading - 2012, here we come.