This debt will kill us. I point out yet again that it starts with the inanities of Keynesian economics where deficits are seen not to matter, a gospel that has been taught for seventy plus years. Economists now believe it almost wall to wall and since the stimulus the results are now everywhere to be seen. How to restore balance without a further downturn in activity is a question without an answer.
The words structure of production, the essence of classical economic theory, is now completely out of the modern economics lexicon. There is therefore no serious comprehension of the linkages between purchase and sale across and economy. There is therefore too little appreciation that whatever final demands a government may create then creates a supply chain behind it to service that government demand. Pull away the public spending which must be at the centre of government policy since we cannot go even further into debt and a major part of that supply chain falls as well. The recovery process is going to be painful.
Meanwhile, the stock market is diving following the debt ceiling agreement. Is this a sign of things to come:
The S&P 500 turned negative for the year on Tuesday as the wrangling over the U.S. debt ceiling faded and investors turned their attention to the stalling economy.
The broad-based index fell for a seventh day and crashed through the key 200-day moving average in an ominous sign for markets. The seven days of losses mark the longest losing streak since October 2008.
“It is going to be a long week,” said Jim Maguire Jr., a NYSE floor trader at E.H. Smith Jacobs. “The bid is not here in the market.”
The selloff accelerated into the close as volume jumped well above average. The fall was broad-based, with four stocks falling for every one rising on the New York Stock Exchange.