From the Post:
Stocks turned negative in the last 30 minutes of trading today, wiping out triple-digit gains from a day spent largely in positive territory.
The Dow broke the 10,000 level again, closing down seven-tenths of 1 percent at 9,974.45.
Before you can day Roubini or 8,500 or EuroZone, folks shorting the market are going crack open a few and start Memorial Day Weekend early.
More bad news from Europe. See Europe Is So Toast, Says Hedgeye’s Keith McCullough: France, Italy Will Crash Next.
And domestically, fiscal stimulus spending needed to prop up the economy, has born-again deficit-hawk Republicans seeing red and spouting concern over the debt they created.
Reasons To Despair
For some reason today’s papers made me feel especially grim about the prospects for economic recovery — not the economic news so much as what one sees about the mindset of policy makers.
Here’s where we are: growing GDP, but mass unemployment still the law of the land, with only tiny progress so far. What can be done?
Well, we could have more fiscal stimulus — but Congress is balking even at the idea of extending aid for the ever-growing ranks of the long-term unemployed. Fiscal responsibility, you see — hey, and let’s make sure estate taxes stay low!
We could get tough with China, which continues its currency manipulation and, in the face of a world of grossly inadequate demand, is actually tightening monetary policy to avoid an overheating economy — when basic textbook economics says that it should be appreciating its currency instead, which would not only rebalance China’s economy but help the rest of the world. So given China’s outrageous behavior, Geithner went to China, got nothing .. and pronounced himself very pleased.
We could do more through monetary policy. Macro theory suggests that the theoretically right answer, if you can do it, is to get central banks to commit to a higher inflation target. But the Fed and the Bank of Japan say no, because … well, that’s not what central bankers do.
It’s depressing: shibboleths and conventional wisdom are blocking all routes out of this slump. And I worry that policy makers will just sit there, for years and years, all the while congratulating themselves on the soundness of their policies.