This afternoon, the stock market went down about 9% in about 15 minutes. It was the proverbial selling panic. Some stocks were thrown away in terror that everything was collapsing. Almost as quickly as the collapse happened, it was over and the market bounced back quickly, although it still closed down by about 3%. Gyrations like this are very unsettling to both the market and the economy. Millions of people will look at today's market action and decide that they better pull back from their investments. Others will run to gold or to treasury bonds for security. The net effect will be slower economic growth and more unemployment.
The main culprit in all of this is the debt explosion all over the world. Greece is today's fuse for the explosion, but the precarious nature of the US financial structure is also of great importance. No one has confidence that the US government could step in to help out. After all, the USA is in debt to its eyeballs, it is spending money it does not have in copious amounts, and there is no end in sight.
There are consequences to spending beyond ones means whether one is an individual or a country. We are just beginning to experience some of htose consequences. Hopefully, this experience will force us towards reality. More likely, this is just a small taste of the things to come. We can use Greece as an example where government workers are rioting in the streets rather than accept the austerity measures of the broke and broken Greek government.
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