The week begins on Wall Street with a mighty shaky start! During early trading, the Dow Jones Industrial Average lost a 1,000 points, plummeting into the mid 15,000 range. As trading began on Wall Street, the DJIA rebounded slightly, only down some 668 points. The New York Stock Exchange is considering a halt in trading should the bleeding continue to worsen. Oil futures fell below $40 a barrel as more ills from China and the rest of the global economy pile up. Things are not much better here, either. The Barack Obama Non-Recovery is still sluggish, prompting more talk by the Federal Reserve on not raising interest rates as planned. The real economy and job growth are still anemic as a record number of over 93 Million, work-age Americans remain unemployed.
Many are pointing to China as the cause of this latest downturn. Two weeks ago, the Chinese central bank devalued their currency, the Yuan, for three straight days after several smaller devaluations throughout the past month. China HAS to have an annual GDP growth rate of 9% just to keep their head above water and right now it is barely 7% and falling. The currency move was made to make China′s goods cheaper and make imports too costly to afford. This hurts many US businesses, such as Apple, which sells a third of all of their products to China.
But, as I have been saying all along, we still have not really recovered from the Crash of 2008. We′ve only ′papered′ it over with trillions of fresh dollars, Yuans, Euros and Yen. The race to the bottom in currency devaluations was an on-going practice through most of 2009 through 2012 with no real impact. It made some feel better as their investments improved on balance sheets, but in terms of truly correcting the damage caused by the mortgage meltdown, it led nowhere. If anything, it left us even more exposed.
So here we are again and this time, simply trying to print our way out may not work. Interest rates from all of the major central banks are already at historic lows. Fed Funds are still at nearly zero and that tool in the toolbox is pointless. The Dow Jones Industrial Average, along with every other major trading market, has been inflated with cheap money. If the NYSE even has a true value anymore, its probably at or below 5,000. At the very best, this will end ugly.