The Stock Market Dive

[Dave Roberts]

I'm intrigued by the absence of one element in the discussion of the recent dive of the Dow and other indices of stock value. I am no expert on economics having only taken a couple of economics related courses in my educational career, but it seems that the issue here just might be spawned by the recent tax cuts signed into law. The tax law created an additional $1.5-trillion in federal debt (even though optimists believe it will eventually be paid by economic expansion as the "job creators" share their wealth). In the short-term, it requires that the Treasury sell obligations of the US government that have to have a high enough interest rate to attract the investment. Unless the Federal Reserve manipulates the money supply by printing more money, thus devaluing the currency, the finite supply has to come from somewhere. In order to obtain that supply of money, could it not be withdrawn from stocks by people anticipating that the market had about reached its height, in the hope of holding onto their gains in the safety of Treasury Notes? If so, is this not the result of that tax bill? That at least seems to fit most of the economics I was taught. What do you think?

[William Thornton]

[Dave Roberts]

[Dave Roberts]

There is an interesting follow-up story out of DC today. I cannot vouch for its veracity, but it raised more questions.

[William Thornton]

Dems are heavily invested in the economy going south so that their election plans are bolstered. Obama was king of deficits.

[Dave Roberts]

[Haruo]

Yeah, Obama inherited a disaster that required spending to avoid depression, and after the first two years his budgets drastically reduced their deficits before more or less levelling off the last couple years. But it's an open question how much any president really has to do with the budget, which after all is hammered out by Congress.

On the other hand, the downtick in the markets Friday and Monday was chickenfeed compared with that in 2015, percentagewise, wasn't it?

I'm hearing a lot of suggestions that the positive results of the new tax bill are fueling the downturn in stock prices. I'll check back after the 16th, when my opinion of the stock markets will be solidified.

[Sandy]

[William Thornton]

My old friend Sandy's seems quite gleeful'over bad economic news. Obama and dems spent 8 years blaming bush and will spend the next 8 taking credit for trump. What a great country.

[Sandy]