As to be expected the markets crashed with the news of US President Barack Obama signing an agreement to raise the debt ceiling. This shows that the market is not reaching well and that investors are “not confident” in the stability of capitalism. Here are the results of the “hidden hand’s” reaction:
US Dow Jones Industrial Average down 4.3%
(the largest since the 2008 global economic collapse)
NASDAQ down 5.08%
S&P 500 index down 4.78%
Okay to many this data doesn’t make much sense to them because they don’t know how to read it. Let me put to to you this way, investors have lost faith in the market right now and are hoarding their money as oppose to investing it and getting the economy climbing.
There are countries in Europe on the verge of losing everything and going into bankruptcy. This means the people will not have money, which means they won’t be able to purchase commodities. This lack of ability to purchase commodities (or in general spend money) makes investors refuse to invest because they’re afraid of not making a profit. If people don’t invest in those countries there will be a recession. Its a self-fulfilling prophesy as money is withdrawn from the circuit of capital.
This has always been one of the absurdities of capitalism and markets to me. The market is more affected by what people think of it as opposed to what is actually done on it. If an economic plan does well, but the public perception is that it won’t work, the market reacts poorly. A plan that is unstable, unpredictable, but the people feel like it will work, then the market reacts well.
Its more important that people believe the market will work, rather than the market actually working. Its kind of like a religion really. If people believe they are being saved and believe God loves them than they are saved and loved. If they don’t think God loves them then they feel as though God doesn’t. The idea is that God loves everyone all the time. But the perception of love is more important than what is fact.
The market is just like the love of God, its only there if you believe it is. Regardless of reality.