I hear today that a number of the Congressional participants named to the Super Committee to Balance the Budget have signed pledges never to contemplate any tax increases. Perhaps the Democrats should sign a pledge to cut no entitlements, and the first meeting they can ask, 'So what do you want to talk about tonight Marty?'
So once again the Great Compromiser appears to be a hapless diddler attempting to organize a herd of squirrels.
This US equity market action reminded me today of a description I read about the equity markets during the summer of 1929. The American Experience series used one of the books which I read to formulate their wonderful documentary, The Crash of 1929.
It was an exceptionally hot summer, and the market had ups and downs that left investors shaken as if they had ridden on a roller coaster. Leverage was high, and the markets were rife with speculation driven by newly created money and paper profits.
Of course there are profound differences as well. The markets are hardly optimistic, and we have already seen a strong correction. This is not to say that I expect the equity market to crash. They can always crash something else, like the dollar or the bonds, or the system of governance. Or perhaps the financial engineers will muddle through once again for a few more years.
Still it does not hurt to review an example of markets that were swinging widely because of serious problems in the economy, laissez faire politics, easy money policies, and the structure of the markets and their leverage themselves. Perhaps this time Benny does not tighten, but perhaps the government will.