Happy Black Monday, 30th Anniversary of 1987 Crash

Greed and fear make the markets, backed by $Trillions in guarantees from U.S. government

On October 19, 1987, "John Phelan, (then-Chair of the New York Stock Exchange), had been up throughout the night in his Manhattan apartment monitoring the bad news that was moving, like a tidal wave, toward the United States that Monday, October 19, 1987. Tokyo exchanges had closed after sustaining a record collapse in prices amid panic selling. The collapse triggered others around the globe. Disaster followed the sun and inexorably exacted its toll from Asia through Europe and then on to New York. Hong Kong was wiped out. In Australia the nation's leading market index lost 20 percent of its total value in the first forty minutes of trading. In Rome, Frankfurt, Amsterdam, and Paris, record losses were recorded. Down and down the prices plunged. In London the stock exchange was experiencing the single worst day in its history."

"At one point, as the grim reports kept flooding in, Phelan ... moved to a window overlooking the darkened New York skyline. He wondered if the world as he knew it was coming to an end, ... . (p. 377. Haynes Johnson, Sleepwalking Through History, American in the Reagan Years, 1991, (WW Norton and Company)) See also C-SPAN.

Celebrate Black Monday-1987 today by reading In These Times.

'The crash of ’87 is a reminder that for all its vaunted rationality, capitalism is an economic system driven by greed and fear.' With these words, long-time In These Times contributor David Moberg began the cover story from the Oct. 28–Nov. 3, 1987, issue.

Thirty years ago, 'Black Monday' sent markets into a tailspin across the globe. The ’87 crash was the largest single-day market crash in history, resulting in the loss of hundreds of billions of dollars on the stock market and shrunken pension funds.

The crash of 2008, and the resulting Great Recession, offered further evidence that the capitalist system is not just risky, but prone to crises. Today, the shaky foundations of our finance-centered economic system remain largely unchanged.

Today, October 19, 2017 the Dow Jones Industrial Average opened at a near-record, 23,107.47, (Bloomberg Markets).

We should rejoice, we are blessed by Donald Trump's stunning genius and astonishing strength.

Just last week Trump said this high value of the securities markets is shrinking the national debt, (CNN).

What can possibly go wrong?

Roubini: Suckers and Fools

Roubini stays negative. Those betting on the Dow hitting 6,500 might be right:

Roubini: The emerging consensus among economists is that growth next year will be close to the trend rate of 2.5 per cent.
Investors are talking of 'green shoots' of recovery and of positive 'second derivatives of economic activity' (continuing economic contraction is the first, negative, derivative, but the slower rate suggests that the bottom is near).
As a result, stock markets have started to rally in the US and around the world. Markets seem to believe that there is light at the end of the tunnel for the economy and for the battered profits of corporations and financial firms.
This consensus optimism is, I believe, not supported by the facts. Indeed, I expect that while the rate of US contraction will slow from -6 per cent in the last two quarters, US growth will still be negative (around -1.5 to -2 per cent) in the second half of the year (compared to the bullish consensus of +2 per cent).
Moreover, growth next year will be so weak (0.5 to 1 per cent, as opposed to the consensus of 2 per cent or more) and unemployment so high (above 10 per cent) that it will still feel like a recession.

Could Be a Bad Week

An update on the Obama's Project: Making Thin Ice Safe column.

The Dow dropped 289 points today from 8,131 (3.56%). And Mike Whitney has a new piece, Housing Bust Comes Roaring Back, Worse Than Ever in CounterPunch that reads like a horror book: "Market analysts predict there will be 5 million more foreclosures between now and 2011. Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. ... Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards. The next leg down in housing will be excruciating; every sector will feel the pain. Obama's $75 billion mortgage rescue plan is a mere pittance; it won't reduce the principle on mortgages and it won't stop the bleeding. Policymakers have decided they've done enough and refuse to lift a finger to help. They don't see the tsunami looming in front of them plain as day. The housing market is going under and it's going to drag a good part of the broader economy along with it. Stocks, too."

Obama's Project: Making Thin Ice Safe

Those with an investment position betting on the Dow Jones Industrial Average plummeting to say 6,500 (it's at 8,131 now), should read Alexander Cockburn's piece in CounterPunch and be happy.

As for the project facing Obama in saving the world economy: the words gargantuan and humongous come to mind, analogous to constructing a snow fortress on thin ice on a central Wisconsin lake during the early Autumn. [Lots of unknowns and ambiguity.]

Cockburn:
On any rational assessment the popular new president is skating on thin ice.

Pollyanna bulletins about the economy puff up from the White House and Federal Reserve, like auguries of a new Pope through the Vatican chimney. ...

The economic news in the near and medium term is ghastly, as Mike Whitney outlined on this site last Thursday [see his A Bulletin from the Captain of the Titanic]. Retail sales crashed again in March, nowhere worse than in the car market, though electronics and building materials were way off too. They now reckon there’ll be just over two million housing foreclosures in 2009, up 400,000 from 2008. Industrial output is going through the floor at an annual rate of 20 per cent, the biggest quarterly drop since the end of the Second World War. US industry is now running at only 70 per cent of capacity, the worst number since they started tracking this stat in 1967. Job losses are currently running at 650,000 a month.

Round the next corner is credit card delinquency and the long-heralded slump in commercial real estate, where vacancy rates are already running at 15 per cent... .

Half a million new jobless every month and the salesmen of 'free trade' still hawk their credo.

Yikes. As for free trade hawkers, mostly Republicans who we hope, to paraphrase Ralph McGill (1898-1969), are little, white quasi-Christian men (mostly) standing alone in their own diminishing circles.

Concludes Mike Whitney in his piece:

(Fed Chair Ben) Bernanke's financial rescue plan is a disaster. He should have spent a little less time with Milton Friedman and a little more with Karl Marx. It was Marx who uncovered the root of all financial crises. He summed it up like this:

'The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit.' (Karl Marx, Capital, vol. 3, New York International publishers, 1967.)

Bingo.

Message to Bernanke: Workers need debt-relief and a raise in pay not bigger bailouts for chiseling fatcat banksters.

Right. And another message that policymakers ought to heed, a message that rarely comes from the mainstream media: Shipping American jobs overseas is bad for the American economy, bad for Americans (duh) though Republicans love the idea, and is in a word unAmerican.

On a related note, from Quote.com News:

(RTTNews) - Wall Street will be busy assessing report cards this week, as the season springs forward. IBM, Coca-Cola, Yahoo, Apple, Microsoft are among the conglomerates scheduled to report in the week that lies ahead.

See also It's D-Day, Shiller, Roubini, Stiglitz, Kuttner and Krugman Sound Alarm.

- via mal contends