The Kochs renew my long-standing commitment to the judicious use of the guillotine.

The Saudis are, apparently, making enough money on oil to take the risk of lowering the price by pumping away, partly to drive US wells out of production (or producers out of business) and partly to keep Iran from getting too much income from its oil. In the US, leveraged operations can't stand a large fall in profitability, because they have a lot of loan payments to make. They go broke. Production is reduced. — Bitter Crank

Well, the Saudis are burning up their cash reserves at an alarming rate. But they are willing to wait it out and not decrease production in order to inflict pain on Iran, their arch Shi'ite enemy, who is not only harmed by lower oil prices, but lacks cash reserves to weather the storm.

Meantime, Iran has just returned to the world market, thanks to the Obama deal, further depressing prices.

It's a perfect storm for cheap energy, and mostly the US middle class benefits. So I'm all for falling oil prices; the fact that the rich stockholders in China and the US are suffering only adds to the delight.

This sell-off is an odd one in that it seems to be driven by good news (the oil price collapse) and irrelevant news (the China stock market losses). Probably neither are at the root of it. Financial reporting is almost all guess work and post hoc narratives.

It is looking more and more like a good thing, however - a loss of trillions for the rich who own most of the market. The less money the rich have, the better off we all are. Recessions are always caused by income gaps and too much money in the hands of bubble-creating rich people. I would say that this sell-off is actually a good sign that the economy will not enter a recession soon, despite 7 years of (sporadic and modest) growth.

I suspect most of this money went into T-bills, which is good for the country, especially if we can oust the GOP congress and start investing in infrastructure on low rate bonds.

Well, the Social Security Fund is invested almost totally in special treasury bills, which are the safest investment on the planet.

The concept of SS is that it is not an investment, but a guaranteed payment. So the point is not to maximize returns, but to make sure the fund is able to pay out the promised benefits as people retire. In that respect it's the most successful US government program ever. It's the largest most solvent fund on the planet. Noting is even close, despite all the rightwing agitprop against it.

The vast majority of US workers have no pension of any significance - they were destroyed along with unions. Pensions are a luxury of the rich.

Most workers depend on Social Security for retirement, which is barred from being invested in the market. So ups and downs in the market don't affect it.

A growing number of US workers simply can't afford to retire so they work until they die.

You don't explain at all why my argument is rubbish — ssu

I explained in detail.

IPOs have no impact on the market or in capitalizing businesses. I told you why. Anybody who understands IPOs beyond what they google understands the situation.

You apparently were blissfully unaware of CDSs and their role in the Bush Meltdown, until I pointed it out to you.

You can't rebut the facts so you post a long-winded skein of more rubbish.

Meanwhile, the critical fact remains unscathed - the vast majority of US workers have no ownership of equities. Period.

I agree. Few things can jump start an economy better than cheap fuel prices. Right now, tens of millions of Americans who commute are on average getting a "rebate" of about $100 a month because of lower gas. It's in their pockets and will be spent. The velocity of that money is one of the best ways to make an economy grow.

Moreover cheap oil will work its way through the system and result in cheaper food prices. None of this will show up in core inflation figures since they exclude energy and food as too volatile. But it will have significant impact on working peoples' lives if it continues.

The idea that they care about stocks falling while they have more money to spend shows a lack of perspective about how most workers actually live.

. Economists don't all agree on these things. — Bitter Crank

The reputable ones do. Every recession is preceded by a growing income gap. Every single one. The larger the gap, the larger the recession. The facts are indisputable. Feel free to google them yourself.

The Bush Meltdown was preceded by the largest income gap since the Depression due to the triumph of conservative economic policies of deregulation and wealth transfers to the rich.

Sorry, it's just the way it is. And I do dismiss the rightwing memes that say otherwise.

When and by whom were credit default swaps ever regulated? My understanding was that CDS were outside regulation jurisdictions (in practice, if not by rules — Bitter Crank

It's just shorthand, Bitter, for the rather serpentine process whereby Republicans, particularly the odious conservative Phil Gramm, made sure they weren't regulated, as they obviously should have been. He snuck an exemption into a budget bill. Typical rightwing bad faith. I didn't want to get into the weeds.

If you want to call it facile be my guest. You don't seem to be aware of the above facts.

The point is SSU's analysis of the Bush Meltdown is rubbish. If conservatives hadn't prevented regulation of tabletop mortgage lenders and CDSs, if they hadn't gutted Glass-Steagall, if they hadn't given the rich the biggest transfer of wealth in US history with the Bush tax cut, the Meltdown wouldn't have happened. There would have simply been a normal recession with a level of mortgage defaults that the system could easily handle as it always had by having the good banks buy up the bad inventory. But due to CDSs, there were no good banks - they all held the toxic assets in the form of CDSs.

Conservative economic policy is always a horrible failure (except to transfer wealth to the rich). Democrats should never agree to any part of it. Not one inch.

If you don't understand the stock market, then at least you should understand how financial institutions with the real estate market creates these boom and bust cycles every now and then. — ssu

We already know how the Bush Meltdown happened: deregulation of mortgage lenders (the gutting of Glass-Steagall) plus deregulation of credit default swaps plus falling income due to the income gap resulting in middle class people using their only major asset (their homes) to pay for health care and their kids' college.

Almost all the rise in loans in the 2000s were refinances, not purchase money.

In short the rich had so much money they put it into lending institutions, usually in the form of high risk REITS. When the bubble burst (and the bubbles created by income inequality always do), the risk was everywhere due to CDSs. The result, a credit bottleneck that caused job losses, causes more mortgage defaults, causing more job josses. We always get mortgage defaults. The FDIC can handle it because with Glass-Steagall there were always lenders with good portfolios. But the deregulation of CDSs (thanks Bush) made all the portfolios toxic.

You're not going to get into some rightwing meme about how poor people were "living beyond their means" are you. God, I hope not. You really have no idea what you're talking about on this issue, do you? It's all from googling.

Landru, you do know that when people play the market, they are basing their buy and sell decisions off of the most current information about the economy, right? — discoii

Actually, no, they usually aren't. Since most of the market is owned by the rich, they are basing their decision on their particular economic situation - it usually involves tax planning to maximize after tax cash. Thus when Reagan lowered capital gains, the market fell precipitously. Can you guess why? It has nothing to do with the economy.

In any case, the market and its relationship to the economy, particular bonds, is highly complex. Anybody who sees a one-to-one relationship with equities and anything is not to be taken seriously.

When stock markets plunge, it makes more difficult for companies to make successfull IPO's or to issue new stock. — ssu

Ironically, the companies that can issue IPOs are the very ones that don't need capital. If they are so successful that they can go public, they can get all the private capital they want or need. A marginal company wouldn't even try to go public.

The purpose of an IPO is not to obtain investment capital, but for the owners to cash out. Usually a large portion of the IPO capital goes to the founders as part of the deal.

So the notion that a falling market starves out struggling IPOs is simply a fantasy. If you're in a position to go public, capital is not a problem.

In any case, this is absurd. IPOs are a vanishingly de minimus part of stock market transactions even in the boom times. They have no impact on a $17T economy.

Dave Foreman, of Earth First! fame, suggested the Great Plains be repopulated with bison and native grasses, and open only to subsistence hunters. You can't help but admire vision like that.

I had personal experience with the Sagebrush Rebellion in the 80s. My view is that they are no different from the Bundy Militia types. They wanted to abuse land for their own profit through resource extraction, mostly through abusive mining and cattle grazing, and resented national policies against that. The cattle ranchers and miners had been given a free ride to use public lands for a century in the West and simply didn't want to face the reality of how their abuse had degraded the productivity of the land, requiring a new cost/benefit analysis at the very least.

The larger question you raise about central government "interference" in rural affairs is probably the real issue here. Needless to say, I don't think it is interference. I think it's rational policy relating to land use. I frankly don't want rural people to control large portions of land - history indicates they abuse it and history indicates it results in land oligarchs arising.

Let fishermen decide how much to fish and within a short time there will be no fish for the fishermen or the rest of us. That's why resources need to be regulated, and for the most part owned democratically. We tried the alternative. It's failed.

By "repressive tolerance" Marcuse meant tolerance of the violent, repressive structures in an advance industrial society - like wage slavery and capital. It comes from a time when conservatives actually pretended they cared about democracy and rule of law, and used that as an argument against the revolutionary left. It had nothing to do with the left's struggle for inclusiveness, except that strategically open socialist societies were often subject to subversion by US interests (as Central America learned), and hence Marcuse was not averse to keeping a watchful eye on how international capital would attempt to use open institutions to subvert revolution.

So, Marcuse meant the exact opposite of people rising up against Wall Street and its financial power, for instance. He contrasts repressive tolerance with "liberating tolerance" which he explicitly defines as intolerance of the Right and tolerance of emancipatory movements of the left.

You can read his essay on this here. http://www.marcuse.org/herbert/pubs/60spubs/65repressivetolerance.htm

A lot of people will agree with you, that idealism is a threat to democracy and ALWAYS leads to totalitarianism. They just have a different "Idealists" in their mind: Leftist socialists (Idealists), environmentalists (Idealists), Gay right activists (Idealists), Occupy Wall Street activists (Idealists), Democrats: Idealists, whatever, you name it. But for many people it is totally inconcievable and utterly incomprehensible to even think that the loony dangerous other side could ever reason anything or have in common any values. That's what I have learned for example following Philosophy Forums and other US forums. — ssu

But of course leftists aren't occupying public land with guns trying to get free stuff. Rightwing knownothing ranchers are. And the same is true about gun rights weirdos and anti-gay weirdos and the religious right - all intent on imposing their views on others.

In contrast the left supports tolerance, democracy and multiculturalism.

This is the classic "reverse-meme" used by conservatives: call those fighting intolerance intolerant because they are against intolerance. It demonstrates the total intellectual bankruptcy of the right.

↪Landru Guide Us Landru, are you seriously suggesting that a stock market crash has no effect on poor people? Even when banking systems are so interlocked with the stock market itself? — discoii

I'm amazed you'd think otherwise.

Working people have almost no significant ownership in the market. Working people have very little credit issued to them, at least not the kind that has anything to do with the market, like corporate bonds.

The issue for working people is not where the market is at (are you really claiming that working folk have profited by the huge increase in the value of equities since the 2008 meltdown?). But rather where the economy is at. If the economy is in recession, and people get laid off, then that affects working people. Recessions have lots of causes. One of them is not a stock market decline.

The current market sell off - the topic of the OP - has nothing to do with a recession and will have no impact on jobs. Neither China nor the US are in a recession and nobody is predicting that there is any risk of one, except the usual rightwing kooks. You've got the cart before the horse.

Your idea of first their being a recession and only then afterwards somehow the stock market noticing it creates a crash is persistent with your illogical Landru-kool aid views. — ssu

More whacky economics from somebody who doesn't understand what the stock market does. SSU probably thinks that when he buys IBM stock the money goes to IBM. Invincible ignorance.

This is what happens why you look to Investopedia for your understanding of advanced capitalism

If the market dissappeared tomorrow, we would have a recession. The prices of stock actually have a meaning to the corporations and companies. If you don't understand that, here's an article that explains that in simple term: "Why Do Companies Care About Their Stock Prices?". So what happens in the Stock Market, especially if the trend is longer than the occasional panic or frenzy, it does have consequences. It will affect employment. A recession or an economic depression would affect even the ordinary guy that has never ever owned any stock. — ssu

Investopedia -- a perfect source for your understanding of advanced capitalism!

Of course you have it backwards. Recessions cause stock prices to fall, not the other way round. But I suspect you're going to persist in your cliches.

Investopedia!

You say that stock markets don't have anything to do with the liquidity of industries. That's true when the stock market is characterizes by what's called a "speculative bubble." That means the market has become a casino. — Mongrel

The market has always been a side bet. Like the guy who bets on whether the dice player will crap out or not.

You must be aware that when you "invest" in the market, not a dime of the purchase price goes to the company? I hope you are

Of all the people that are or have been saying that this bull market is over, you refer to Zizek??? — ssu

Zizek said it a long time ago.

A crash means the bottom has dropped out of confidence in the economy. There's usually something gravely wrong that precipitates a crash. These days, a sign that a crash is trying to happen is that markets halt trading. If they're doing that.. that's a bad sign. — Mongrel

Well, no - it means that the rich have put their money somewhere else. It's not like they care about the US economy or the glories of the stock market.

It just so happens that the US stock market, like T-Bills, has for the past 90 years been a safe and predictable place to put your money if you're rich. But of course, it wasn't always that way and maybe that's all changed, as Zizek has suggested.

The decline for the working class parallels stock market declines. — Bitter Crank

I'm not quite sure what decline here means, but the relationship between unemployment rates and stock prices is well studied. The relationship is complex but no economist believes that falling stock prices produce increased unemployment and many see no correlation whatsoever.

The article linked below surveys the literature for the US, China and Japan. To the extent the OP claims that the recent fall in stock prices predicts higher unemployment in any of these three nations, it is simply contrary to the data.

http://ccsenet.org/journal/index.php/ijef/article/view/25036/15607

I'm well aware of the overall decline in income in the lowest quintile over the past 30 years. The Bush Recession however affected the US economy in other quintiles, a new phenomenon which makes narratives about Americans owning stock and 401(k)s obsolete. And that's my point.

2008 was a genuine crisis, and like all crises for shock capitalism, it was used by conservatives to lock in more systematic ways to transfer more wealth from more working Americans to the top 10% and particularly the top 1%. That is a new phenomenon, or at least, we haven't seen such disparity since the Guilded Age.

You need to avoid aggregated information in economic matters. It leads to nonsense (like the Bush tax cuts providing Americans "on average" $1800 of relief). Income quintiles matter. Consumer loans are down down down over the past 8 years for most of us (except the pernicious student loans which are up for obvious reasons and are a burden on working Americans). Only the rich see an increase in access to credit.

http://thefinancialbrand.com/43930/millennial-boomer-banking-loans-data/

http://www.cnbc.com/2014/10/18/banks-are-lending-again-but-mostly-to-rich-people.html

There is no worse mistake (and among conservatives it is not a mistake but a strategy) in economics than to aggregate economic data and then suggest it applies to working Americans. It almost never does. The classic case is "free" trade - good in the aggregate, bad for most working Americans.

huge swathes of credit provided by banks is tied up in the market. — discoii

Just to gloss this, we have had a credit bottleneck since the Bush Recession. Hardly anybody but the rich can get any credit (except for student loans and we know what that leads to). Consumer lending is at a stand still and has been for years.

So the volatility of the Chinese market isn't going to affect that. It really can't get much worst, which is why most people's income has been stagnant or declined for the past 8 years - except for the superwealthy - and why growth is anemic. Normal people simply can't get capital to start businesses. All the lending is to large corporations, i.e., to the very rich.

DDD doesn't get any of that cash. — Bitter Crank

This is something most people don't understand. They think that "investing" in the stock market capitalizes the business at issue, which can then produce more and hire more people. Of course unless its an IPO (and even that's iffy), the money doesn't go to the company at all. It goes to the owners of the stock who are overwhelming very rich people.

"Investing" in the stock market is like "investing" in a horse race ticket. The "investment" has no impact on who wins.

I'm constantly amazed at how conservative apologists for capitalism either don't know this or pretend not to (like the WSJ does) to foster a false sense that all Americans have a stake in US businesses.

I think you're overlooking the fact that if the superwealthy catch cold, the poor die of pneumonia.

A stock market crash triggers a series of events that result in increased unemployment and economic stagnation. When unemployment reaches 25%, it's a depression. — Mongrel

No, it doesn't.

A credit bottleneck does. A credit bottleneck may also lead to a decline in the market. But a decline in the market does not by itself lead to unemployment. There is no relationship here.

But if you think it is, describe the mechanism. All a decline in the market means, for the most part, is that very rich people are selling their stocks to other very rich people, at a lower value than the day before. They may still be making tons of profit (if the stock is appreciated). And they may do it because they want to lock in that profit.

Thus when Reagan lowered cap gains on the rich, the market declined precipitously. The reason is obvious. Now lots of things affect the market. But mostly it has to do with what rich people are doing with their money and why. It has little to do with the economy per se.

Indeed, money that is in the market isn't doing anything to create jobs. A decline in stocks can mean that the rich are cashing out and putting money into real investments that actually produce things and hire people. The stock market is almost exclusively a secondary market.

I never thought we weren't on the same side, Bitter

I'll repeat what my criteria of science is again: science is what scientists do. I say this because your characterization of my position -- "guys in garages" -- is quite off the mark. Just because the current institutions of science haven't always existed that doesn't mean scientists didn't publish, didn't archive, and didn't utilize standards. — Moliere

Yes it does.

If they archive, publish, peer review, it means there are institutions for that purpose. Generally that cost money. With more advanced science lots of many. But in any case, it requires those institutions. Library, research archives, publication, peer review, scientific associations don't take place as a result of hobbies. So you seem to be agreeing with me and then redefining what an institution is.

But in any case, the claim that "what scientists do" is science doesn't survive scrutiny, and hardly means anything. It would mean that oracles and astrologers are scientists - if they call themselves that.

Scientists get that role by virtue not of a label, but institutions dedicated to the pursuit of methodological naturalism. Those that meet the requirements and standards of practice are scientists and nobody else.

That's why the guy who started the Creationist Museum, who calls himself a scientist, isn't.

No consistency problem here at all. Einstein lived in a culture that in fact did have scientific institutions (indeed arguably the most advanced in the world - not a coincidence by the way). So a guy working Patent offices wasn't a hobbyist, but was able to avail himself of those institutions, which he immediately did when he developed the theory and sent it in for peer review and publication. If it remained some notes in his apartment because of a lack of scientific publications, we might still be in the Newtonian age.

So your premise is counterfactual on that level.

Worse, it's counterfactual in the sense that it assumes Einstein could have developed the ToR without peer review journals, without archives of knowledge, without the technology used to produce such knowledge, and so forth. I'm going to say that's a false premise. It isn't a coincidence that Einstein developed the theory when he did where he did, and that had to do with the advanced state of scientific institutions in Germany and the western world at that time. The theory would have been inconceivable a half century earlier.

The WSJ agitprop likes to talk about how 50% of Americans own stock as if that means working folk's financial well-being is tied up in the market (the myth the rich want to propagate). It's nonsense. Except for the top 10%, Americans own a de minimus meaningless amount of stock in terms of value (I provided the links).

The average value of stock owned by middle class people is about $14K. For lower class, it's $6K. And of course over 50% of Americans own no stock. Zilch.

In short, if the market disappeared tomorrow it would have almost zero impact on 90% of Americans. The stock market is owned by the superwealthy and the wealthy. Nobody else has a stake in it.

Stock prices have nothing to do with capitalization by foreign investors. The capitalization would have occurred during the IPO. After that stock sales proceeds go from rich owners to rich owners. The company doesn't get any of the "investments".

Stock market investments - except for IPOS - do not capitalize companies. It's investment in the same way a gambler "invests" in a roulette wheel.

Credit crunches are serious matters. Hence the Bush Recession was disastrous. They are almost always the result of underregulation of financial institutions and margin purchases (Thanks Bush). That has no direct relationship to stock prices, much less stock options.

Like I say if you think stock options are related to unemployment, show us the mechanism. That's not how stock options work.

At best they only affect people who are retiring. The average amount of saving a retiring American has is $10K or so. A pittance.

You're simply not describing reality. The vast majority of Americans - and even more so in the world - own no substantial stocks. It makes no difference to their situatoins whether stocks go up or down.

Read the links. The average middle class family owns - 14K in stocks. That it. It has no impact on their financial situation except in the bad sense that every penny counts for 90% of working people. But you don't retire or start a business on 14K.

This may help to see the irrelevancy of stock ownership to 90% of Americans

http://inequality.org/wealth-inequality/

http://www.cnbc.com/2014/09/08/the-stock-gap-american-stock-holdings-at-18-year-low.html

http://money.cnn.com/2014/09/18/investing/stock-market-investors-get-rich/

Read your own link.

The amount of stock options are meaningless since the average American has about 10K in savings. Your link is about stocks in any case. 85% (about 90% now) are owned by 10% of the upper income earners. 50% are owned by the top 1%. Those facts are not in doubt. Do the math.

You're fallling for WSJ agitprop.

In any case, stock options don't involve current payment of wages but future exercise, so a drop in stock prices has no impact on employment. If you think otherwise, describe the process.

No. A huge number do not. 90% of Americans (probably 99%) have no stock options and barely get by on low wages.

Stock options are for comfortable people in the higher middle class who are doing just fine.

You're describing an economy that hasn't existed since the GOP set its sites on destroying unions back in the 80s and succeeded.

Layoffs don't occur when the market collapses. Layoffs occur when there are credit bottlenecks as in the Bush Recession. Markets go down for all sorts of reasons, most of them totally irrelevant to credit or the value of the companies.

Like I say, markets are mostly rich people buying and selling from rich people for their own reasons (sometimes to lock in capital gain reduction offered by feckless GOP lawmakers sometimes to cover margins allowed by feckless GOP lawmakers). Hardly any stock purchases are related to the companies at issue - only IPOs involve capitalization, and those are vanishingly rare with respect to stock trades.

I'd note that the market has risen to historical heights not too far after the Bush Recession, while unemployment remained high and is still high by historical standards.

Our health and welfare depends on far more than good predictions. But, all the same, the number of practitioners, or the status of a discipline, doesn't specify what philosophy is. The same holds for science. This is why I mentioned philosophy -- philosophy is still philosophy even if it's not the most popular practice in the world. — Moliere

Of course it does, but that's neither the claim nor the issue. The fact is philosophy can't do dentistry. So it matters if we have science or not. And that costs money and requires the institutions I have mentioned.

Insofar that you grant my first premise -- that science is what scientists do -- then I'd say you are in error when you state that science has nothing to do with an interest in nature. My position follows easily enough from this. At that point it's just a matter of reading the history of science -- which surely precedes the enlightenment.

It's noteworthy to say that an interest in nature is not the defining feature of science. Pagans also have an interest in nature, but pagan rites are religious and not scientific.

Even so it is not predictive power alone that makes science what it is. — Moliere

We're repeating ourselves. Guys in garages can't do science (unless there exists institutions of science), for the reasons I noted - without archives of knowledge, standards, peer review, publication and funding to keep all this afloat, there is no science, just hobbyist engaged in trial and error on desultory matters that happen to interest them.

I'm not so sure. It sounds to me that you would just call the cancer-curing oracle science, if it happened to make good predictions.

And, I don't share your rosy view of science. It's fun and interesting, but I'm not about to give it three cheers. — Moliere

Nope, the premise is there is no methodological naturalism at work. It's an oracle who gets supernatural information from God or Cthulu or the ectoplasmic continuum or whatever, outside of any possible verification or any input from methodological naturalism.

Now, would you go to that guy if he was better at predicting what would cure cancer, if you had cancer? You'd be a fool not to. Saying that is science is just self-serving definition.

Nor is this too far fetched. Like I say Big Data mining may result in us discerning correlations without causation that result in better predictions than methodological naturalism. If so, we'd be fools not to use Big Data even is we don't understand why.

If Big Data determined that doing heart surgery on the same day the Japanese yen varied in value more than 1% resulted in less lethality, and we found that correlation over and over again, we'd be fools not to schedule heart surgery on those days, even if there is no causal explanation. We probably assume a causal nexus but if Big Data kept providing such powerful predictive outcomes, we probably ultimately wouldn't care and the whole notion of causality would dwindle.

I doubt that will happen since I'm a modern man who lives in this dispensation of the Enlightenment. But it wouldn't utterly floor me if it did happen.