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BIRTHING PAINS - America on brink as markets plunge

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The end of America as we know it approaches.

The U.S. stock market opened with a bang on Monday, and it appears to be the same sound you hear when something catastrophic happens to your engine. Several commentators have already dubbed the day, "Black Monday" as the market appeared to be on track for its largest one-day drop since November 2011.

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Highlights

By David Drudge, Catholic Online (NEWS CONSORTIUM)
Catholic Online (https://www.catholic.org)
8/24/2015 (7 years ago)

Published in Business & Economics

Keywords: stock market, collapse, morals, federal reserve, china, business, end times, birthing pains, black monday

LOS ANGELES, CA (Catholic Online) - Within hours of opening, the market appears to have recovered some of its losses. Still, initial drop was massive. The Dow Jones lost 530 points, down about 3.1 percent. The NASDAQ dropped 171 points, which is around 3.5 percent.

Market experts are widely blaming the drop on China, which suffered major losses on Friday as it became obvious their normally white-hot economy was slowing. There's also concern over the Federal Reserve. Investors have positioned themselves for a greatly anticipated rise in interest rates this September, however minutes from a recent meeting of the central bank reveals they remain concerned the economy is weak.

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Monetary policy is intended to moderate business cycles, the expansion and contraction of the economy which can be very disruptive. By raising interest rates, the Federal Reserve can curtail inflation and by lowering rates, they can encourage spending which stimulates the economy. Presently, rates are low to encourage investment and spending. But there's a big problem looming on the horizon.

Low rates have not helped the economy as much as they should. Wall Street has had some good times, but Main Street remains sluggish. This is a result of the loss of purchasing power due to stagnant wages and high taxes, especially on the middle class. Wall Street has enjoyed the easy money, but it hasn't trickled down.

Low rates are the primary weapon against recession, which is an inevitable visitor. The dramatic slowdown in China makes it apparent the entire global economy could be on the brink of recession. What will the Federal Reserve do when the recession arrives in America? The answer is virtually nothing, since it can't cut rates much lower than they already are. That means Americans will suffer that much more during the coming recession.

Low oil prices are also taking their toll on the American economy. Saudi Arabia has been engaged in a price war, seeking to knock American oil production offline ahead of the full boom of fracking. Fracking makes the USA energy independent and cuts into demand for Saudi oil. Fracking is also expensive, so it is only profitable if the price of oil is at a moderate-to-high level. By flooding the markets with oil, Saudi Arabia can depress the price enough to disrupt American operations. It is cheaper to import oil from Saudi Arabia than to produce it domestically.

This disruption has resulted in massive layoffs and slowdowns in the oil sector, which is a major player in the American economy. The upside is that it has caused gas prices to drop, which can boost the domestic economy, but with wages low, taxes high, and many Americans staying closer to home as a result, its benefit is limited. In states like California, which require special blends of gasoline during the summer, the low price of oil has barely been enjoyed at the pump. Californians still pay more than the rest of the nation, in some places such as Los Angeles, that difference can be as much as a dollar more.

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Much of the U.S. struggles with drought, bankrupt political leadership, and a variety of other substantial woes.

History might, or might not note Black Monday as an especially bleak day for America, but that's irrelevant. Instead, history should note the black years, from 2008 on, during which our economy failed, our morals were abandoned wholesale, and our political system finally exploded from corruption and waste. It's the time when the middle class went extinct and America lost all credibility on the world stage.

Today's news is really just about another birthing pain.

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