There are three other components to this drop in the stock market.
First, there is a realization that the stock markets are way overpriced due to the Bush Tax Cuts. Not only did Bush temporarily pump up stock values because of the 15% tax on Dividends and Long Term Capital Gains, at the same time he injected money into the hands of the people who buy these same stocks. In other words, it is a pyramid scheme and people are starting to realize it.
Second, there have been deferred liabilities created due to the pumping up of the stock prices. In other words, capital gains tax was paid as the values of stock went up and were sold but the gains were taxed at only 15%. Now that stocks are sitting up at higher prices, and when the Bush Tax cuts expire, the values will go down, almost automatically. Those same people that paid capital gains taxes on the way up will now be taking capital losses but at higher rates, which means less than the expected money for the Treasury.
Third, the National Debt, at $9 trillion dollars is a pathetic joke on the stupidity of the American People. Trickle down did not work again and this time it is putting us in a dangerous situation, thanks to the pitiful whining and lying Republicans.
People are beginning to realize what is going on and that is what is causing this decline. The sub-prime problem is contributing but I don't think that's where the real problem is.
This decline was inevitable. The factors I mentioned above, plus the mortgage problems and add to that the United States is being led by arrogant imbeciles who will not stop the bleeding. Like I said, get out of the market. I didn't think the market would realize, so soon, that the pyramid scheme was happening. Maybe investors read my diaries via the Internet and unlike the people on the Daily Kos, they are beginning to understand to some degree that all we get from the Republicans is financial smoke and mirrors.
WHAT IS THE REAL VALUE
Our National Debt is huge, regardless of how the Republicans try to spin it as a small % of GDP. 5% of $9 trillion is $450 billion dollars. Is that a small amout? Well that is the interest on the Bush/ Reagan debt, if we could stop it today. By the time Bush leaves office I bet his damage will bring us over $10 trillion dollars.
So many Americans losing jobs and careers to people overseas, to American companies laden with fair wages, medical costs, pension costs and regulation (these are good things) where foreign companies pay nothing to their employees and there are no perqs and regulations. But even those same foreign companies who operate here and send all the money back to Japan and China, they have new employees so their wages are low and they have no pension costs because they just began. Toyota, Nissan, Honda,,etc should be forced to contribute to a collective pension fund, as they come in here with a huge advantage.putting undue pressure on our most respected industries.
One major principal used for valuing businesses is how difficult it is to get into a given market, with start-up costs, non-productive training costs..etc. Obviously, the more difficult, the higher the attributed value. However, now with pension and benefit costs and timed salary raises not related to performance (including the pillaging done by the chief executive officers), the company already in the market for decades is at a huge disadvantage.
Given all these problems, how can our stock markets be used as indicators of success or failure of an administration's policies. Generally, they cannot because there are too many outside factors affecting the prices of securities. Even if the markets go back up Monday, there are real problems with American business, the first of which is that the middle and upper middle class Americans are being taxed much too high and the wealthy Americans need to be taxed at much higher rates. Along with that, Congress needs to legislate a flip tax where any company or individual who expatriates and moves his or her assets out of the country, should pay a tax of 50% of the value of their asset. So, if a company like Halliburton runs off to Dubai, they don't get out without a huge payment to the people of the United State...the country that allowed them to get where they are. A flip tax is a widely used way for co-ops keep some of they growth attributable to the efforts of the co-op corp.
So, let us learn about all these things so that we can dispel all the lies and spin jobs created by the Republicans.