Reply #97: LOL -- but no, that's not what I asked either -- ;-) [View All]

[Tansy_Gold]

I'm not talking about a decline in an individual stock that results in its being replaced on the DJIA; I'm talking about precipitous drops, either one right after another domino fashion or multiple simultaneous meltdowns, that can't be hidden by putting different stocks on an index.

I guess maybe another way to put it is --

What would it take to crash the market?

And I mean that in a really sincere manner.

For instance, hypothetically -- The price of gas keeps going up and groceries keep going up to the point that hyperinflation is no longer covered up by gubmint number-fudging of the CPI. What used to be the middle class can no longer buy cars and trucks, not even fuel-efficient ones, to the point that GM and Ford resort to massive lay-offs. Their stocks fall precipitously as investors get out while the gettin's good. The lay-offs will obviously trickle down to suppliers, but also to retailers as the unemployed cut back on spending. (Following this to foreign manufacturers of shoddy plastic crap is just another line of inquiry.) Airlines are going bankrupt already on high jet fuel prices, so their stocks start to drop. Hotel and motel chains start to go down, as well as vacation/resort facilities like Disney World, Las Vegas, etc. Anything associated with "luxury" or even "non-necessity" starts to see steady drops, from franchise restaurants to expensive logo clothing. Real people are really unemployed and really strapped for cash, so the retail and service sectors are hit harder and harder and harder.

As investors pull their money out of stocks and into, say, commodities, will food and gas prices go higher, exacerbating the hypothetical crash?

(I'm not even considering all the derivative madness; I don't completely understand it, so I'm sticking with things I have at least some grasp on.)

I know it sounds like I'm being facetious, but I'm really not. I think the system as presently constructed is heading for an inevitable and probably unavoidable crash -- the money that's been "made" in the stock market is now moving into commodities because greed is the name of the game. But just the act of moving "investment" dollars into commodities exacerbates the problem that started it all. Doesn't it???

Enron seems to me to be a case study; it didn't take long for that giant to collapse once the dominoes started falling, and so I'm wondering if it will take long once the stock market(s) starts. And I'm not an expert by any means, so predicting when that "start" is is beyond me. Will it take a week? A month? A year?

But the second part of the question then is what happens AFTER the crash? What happens to the U.S. economy, or what's left of it? How long will it take for the effects of the stock market crash to be felt in average American homes? Or will it have any effect at all? Is the stock market so totally divorced from the working economy that the crash has no impact at all? But what if it does impact the real economy? We already know our economy has lost much of its manufacturing base in favor of services and financial services, so what happens if the rest of the manufacturing base melts away under the pressure of high oil prices? How does that then impact services?

I think we also have to look at the cost of high oil prices as reflected in the prices for necessities, with food at #1 priority: fertilizer, farm equipment fuel, transportation fuel, storage and preparation fuel. If crops are converted to biodiesel, will speculation as well as supply/demand push food prices higher and higher, again exacerbating the original spiral?

We're already getting stories about farmers reverting to animal-power for farming; I recall a tv documentary -- might have been 60 Minutes, but I'm not sure -- back in the 70s about a farmer in Minnesota IIRC who had sold off his equipment, sold off some acreage, and was able to show the same profit by farming fewer acres WITH DRAFT HORSES. There have been studies that show farm production is more efficient -- more production per acre -- on smaller farms than on huge corporation agri-operations; will we go back to that and actually be better for it?

I don't know. I just don't know. But as I watch gasoline prices rise daily, with no corresponding rise in my virtually non-existent income, as I cut back on my driving more and more and more -- to the point that I am not sure I could even afford to drive to a job interview if I got one -- and as I watch grocery prices rise subtly and quietly and without all the fanfare of pump prices but with all the more insidious malice, I really begin to wonder if there is any way whatsoever at all to stave off a complete and total collapse of what used to be the American economy.

What options are there for those of us who don't have financial cushions? What options are there for those of us who think we have financial cushions and then find out they're air mattresses and someone poked a hole in them?

I've comforted myself for a long time with the notion that we won't slide into another truly "dark" age because the knowledge needed to sustain and/or resurrect a viable economy won't be lost, but I'm wondering now if there won't be such a massive fight/war for scarce resources that even vital information/technology will be lost? Is it a doomsday mentality? I don't think so, because I firmly believe we need some doomsday thinkers who can address nightmare scenarios BEFORE they happen. I'm frequently accused of being one of those folks! ;-) And maybe that's just what I'm doing here.

Tansy Gold, who is often not sure what she's doing no matter where she is!