In truth, the real answer is the economic equivalent of kudzu. It is called 'capitalism' and left alone, it grows like crazy. It will choke out everything in its path. Will there be pain? Of course. Bad companies, bad investors, and bad citizens must be drowned by capitalistic forces that present emergent opportunities to those of skill and prudence. Capitalism has always worked. Printing presses have never worked. Yet, we continue to let our idiot politicians engage in crazy behavior as defined by doing the same thing over and over and expecting a different result.
Unfortunately, our elected officials are far too stupid to battle the real power that has invaded our country. The central bank controls the world of derivatives and they have ballooned that beast to close to a quadrillion dollars. For perspective, the stock market capitalization of the world is less than $60 trillion dollars. To carry on their shadow banking Ponzi scheme to rule the world, they need some very large banks to help out every now and then. You know, when they need someone to buy up garbage like CountryTime Credit or Bear Stearns or AIG, the small banks don't have the fire power. No, this is a 3-card monty game and shills are needed to pull of the scam. Since the big boys apparently loaned out and then lost all of their money, the central bank has to restore them. Thus, we have TARP and TAF and HEIST and THIEVERY as they come up with ways to shift money away from the taxpayers use to the banks' use. Treasury Secretary Geithner wants another $2 trillion and the dopes in Congress want another $1 trillion dollar installment in the 'stimulus effort'. Yeah, that'll work.
What did the stock market think? Well, the Dow went down about 5% on the week in spite of a gallant Plunge Protection Team (PPT) 238 point one hour rally at the end of the day on Thursday (2/12/09). Why did they rally the Dow at exactly 3:00 pm? Well, the Dow fell to the 7600 level and that is the mid-point of a double top from depression city and they just don't want to let natural forces play out. Interestingly, at the same hour on Thursday, the dollar crumbled and bonds sold off. This means we, you and me, have become sacrificial lambs to the bankers. In an effort to save them, the PPT is willing to devalue the US dollar and let bonds sell off resulting in yields and interest rates moving higher. Here is an easy question: Do we need interest rates to go up right now? Of course not. What was it that Isaac Newton proposed? Every action has an equal and opposite reaction. You simply can't manipulate the stock market and not expect to suffer from some nasty consequences. The bottom line is this. The stimulus is about helping the banks to help themselves to us. It is not about helping the average American. And, the stock market is beginning to realize that. Thus, the sell-off this week.
Looking ahead, the 7500 range to the 8200 range is Hamburger Hill to Bernanke and the PPT. This is WWIII. The central bankers of the world will throw everything they have at the stock market right now. Unfortunately, the stock market isn't the one that's broke here. It is 'Joe' America and he is spent out, borrowed out, mortgaged out, leveraged out, and quickly becoming down and out. Our economy has run out of prospects to spend Obama's 'stimulus' and borrow Geithner's bailout. Look for more of the same next week with downward market bias.