Taken together, the drop in the various market indices on Wednesday and Thursday appear to be the largest two-day decline in almost a year and a half. And what supposedly triggered the sell-off and decline? The fact that the Federal Reserve indicated that it just might stop buying something like $85 billion in bonds every month. Duh!
Believing that the continuing purchase of such bonds, otherwise known by the euphemism of “quantitative easing” (or QE), would or could go on forever makes the belief in the tooth fairy, the Wizard of Oz, and moderation by the Taliban look sensible by comparison. The financial “wizards” of Wall Street, including high-paid hedge fund managers, program traders, and various other supposed financial icons had to know that such a program had to end or be throttled back. So why, if they knew this, did they go into a panic?
Because they were using the stimulus of QE to run up stocks in the short run to bolster their own bottom lines – and bonuses – and didn’t believe that Chairman Bernanke would signal an end to the artificial bull market so quickly. Ah yes, and these are the geniuses who are among the most high-paid executives/professionals in the United States. They’re also the ones who created the mess of the Great Recession… and they’re at it again.
Despite Dodd-Frank, there still is little oversight of these self-proclaimed experts, and no real significant reform of either banking or investment banking. And Congress continues to tie itself in knots over anything requiring real oversight or reform, as witness the scuttling of the legislation that made a very modest attempt at reforming farm subsidies… or the continued hassles over fixing a broken and essential non-functional immigration system… and we won’t mention, except in passing, the fact that despite overwhelming public support for requiring background checks of firearms’ purchasers, that, too, never happened.
Just how bad will things have to get before Americans start electing politicians who are more interested in solving problems than getting elected? I don’t know… but I’m definitely not holding my breath.