Deflation Dow Crash

This is what a bubble burst looks like. It was a long time coming. Many of us reduced our exposure to our stock accounts after it recovered from the 2008 Meltdown. We did this over the past several years.

The Dow Industrials hit an all-time high of 18,312.39 Index points in May of 2015. By August 10, 2015 the Dow had declined 712 points to around 17,600.  On August 20, 2015 the sell-off began and the Dow dropped to 16,460, a drop of 1140 points. Today, August 24, 2015 the sell-off continued sending the Dow to close at 15871. The Dow is down 2441 points from its high of 18312. Source: Fox News https://finance.yahoo.com/q/hp?s=%5EDJI+Historical+Prices

This is a 13.3% correction from the 18,312 high of May 2015.

Federal Reserve money printing created a bubble in the Dow. Banks got trillions from the Fed at zero interest and funded investors to create the bubble.  That raised the Dow to artificial highs.

Lower demand is making commodity prices drop.

The sell-off came with the decline in China’s stock prices and the realization that global GDP was likely to decline. US corporations have relied on foreign operations’ profits. Bond interest is also down as a trillion left the Dow.

Big investors wanted to end the gradual decline from May to August, pull out and come back to lower stock prices for bargains.  Banks didn’t want the Fed to raise the discount interest rate from zero to .025. 

Obama’s policies aimed at punishing global corporations with taxes on its overseas operations is being met with this push-back plus companies talking about moving their headquarters out of the US.

Governments borrowed and wasted trillions and crushed free markets. This crash is the overdue reaction by the markets to burst the bubble.

We still have other bubbles ahead.  If Western governments don’t lower their spending and pay down their debts, the sovereign debt problem will continue to crush those affected national economies, like Greece.  If the use of the US dollar declines as a global trade reserve currency, we will see a drop in the value of the dollar. The student loan bubble is building along with warnings about the solvency of Fannie Mae and Freddy Mac, so there is a consumer debt bubble building. These bubbles will continue if the Fed continues money printing. If government regulations continue to strangle the free market, we will suffer. Our GDP will decline until it finds bedrock, when it reflects real demand.

Norb Leahy, Dunwoody GA Tea Party Leader