"The Stock Market is signaling the economy is in trouble; it's not saying we have a debt crisis"

[Better Believe It]

New York Times’ Panic Reporting Gets S&P, Markets 180 Degrees Wrong
By: Scarecrow
August 8, 2011

The stock market is signaling the economy is in trouble; it’s not saying we have a debt crisis. The Commerce Department revisions to GDP signaled that the US economy was falling into a depression in 2008 and only barely escaped in 2009, after the stimulus and Federal Reserve actions started to kick in. The recent jobs numbers tell us unemployment is not likely improve much for several years, which leaves parts of the economy in a near depression. The debt debates are telling markets there’s no rational discussion in Washington about how to boost the economy. Given that and more, it makes sense for stocks to be tanking.

The debt reduction hysteria is making the economy worse and is self-defeating. The debt hysteria is the economic snake oil everyone from the President and his advisers to Pete Peterson and Simpson-Bowles to the Tea Party are selling. With the economy still on the edge of recession, and parts in near depression, the only thing keeping the economy afloat is federal spending. It may need that support for years, because the recession was much deeper than everyone thought. But if federal spending declines, as the debt hysterics are demanding, and state/local government spending continues to tank, then GDP must fall. It’s just math. As the economy declines, there will be less collected in taxes, and more paid out in safety net spending — unless a cruel nation slashes that too — so the net result could be higher deficits, or at least less debt reduction than they expected.

President Obama and his advisers own this mess. It was the President who insisted that we needed to slash the debt by $4 trillion over ten years, who said that was a precondition for “sustainability” and getting our fiscal house in order. He told the nation we can’t even have a useful conversation about growing the economy or creating jobs until we did that. All his advisers echoed him.

It was all gibberish. But when S&P and Moody’s use the $4 trillion trigger and no one says, “huh?”, it’s because the White House validated that completely arbitrary number. Thus S&P’s $2 trillion “error” may reveal they’re incompetent and pursuing their own ideological agenda, but its still true that the debt limit bill got just over $2 trillion and left us $2 trillion short of the arbitrary $4 trillion. It’s all gibberish, but it’s the White House’s gibberish. Worse, it’s forced every timid Democrat, including the entire leadership and millionaires like John Kerry,” to echo the same gibberish. Shame on them all.

Please read the full article at:

http://my.firedoglake.com/scarecrow/2011/08/08/new-york-times-panic-reporting-gets-sp-markets-180-degrees-wrong/