I agree. Few things can jump start an economy better than cheap fuel prices. Right now, tens of millions of Americans who commute are on average getting a "rebate" of about $100 a month because of lower gas. It's in their pockets and will be spent. The velocity of that money is one of the best ways to make an economy grow.

Moreover cheap oil will work its way through the system and result in cheaper food prices. None of this will show up in core inflation figures since they exclude energy and food as too volatile. But it will have significant impact on working peoples' lives if it continues.

The idea that they care about stocks falling while they have more money to spend shows a lack of perspective about how most workers actually live.

God, I hope not. You really have no idea what you're talking about on this issue, do you? It's all from googling. — Landru Guide Us

It's obvious that economics isn't your strong point, the more condescending, the more ignorant. Don't know which is more annoying, your arrogance or your ignorance. What strikes even more that you don't simply even bother to read what others write, you just make it up... assume your condescending views your so full of. Yeah, good 'ol Landru.

We already know how the Bush Meltdown happened: deregulation of mortgage lenders (the gutting of Glass-Steagall) plus deregulation of credit default swaps plus falling income due to the income gap resulting in middle class people using their only major asset (their homes) to pay for health care and their kids' college. — Landru Guide Us

Deregulation typically makes banks or financial institutions to compete of market share. Deregulation is one of the things that do get a speculative bubble moving.

Yet then typical loony-Landru: "plus falling income due to the income gap resulting in middle class people using their only major asset (their homes) to pay for health care and their kids' college". OK, so what you are saying that falling income creates a housing bubble?

The purpose of an IPO is not to obtain investment capital, but for the owners to cash out. Usually a large portion of the IPO capital goes to the founders as part of the deal.

So the notion that a falling market starves out struggling IPOs is simply a fantasy. If you're in a position to go public, capital is not a problem.

In any case, this is absurd. IPOs are a vanishingly de minimus part of stock market transactions even in the boom times. They have no impact on a $17T economy. — Landru Guide Us

My my. Corporate finance isn't one of Landru's strongpoints either. And do note that already established stock companies can issue more stock. It's a convenient way if you can yourself (or the owner) can decide just what kind of "interest rate" they might choose in the way of dividends. They can opt not to pay dividends at hard times. But the competitiveness of financing companies through issuing more stock is of course rubbish according to Landru.

The point is SSU's analysis of the Bush Meltdown is rubbish. If conservatives hadn't prevented regulation of tabletop mortgage lenders and CDSs, if they hadn't gutted Glass-Steagall, if they hadn't given the rich the biggest transfer of wealth in US history with the Bush tax cut, the Meltdown wouldn't have happened. — Landru Guide Us

Here the Strawman-Landru goes again. What ought I be talking about? Ah... I got it: the ridiculous argument of Welfare queens and Clinton being the reason! That's what you think anybody saying anything other than exactly your view will be talking about.

You know, you don't even bother to think through what happens when you take Glass-Steagall out of the picture, when you have deregulation, when you have lax control or the worst that is called "self-regulation". What happens? Exactly what I said: financial institutions start a massive competition of the "new" opportunities to grow their market share. Since prices are rising, the losses are minimal as people that cannot make their payments simply can sell the real estate with profit. One economic historian I knew that had wrote a history of one bank here that in the end went bust said that there's a clear point when the whole thinking of bankers changed: when normal banking was referred to "selling" and "buying" money. And what the bankers that earlier had been taught to be carefull were now demanded to sell money as much as possible.

Anyway, this answer is a perfect example that you just assume people to write what you think, not actually bother to look at what they say. You don't explain at all why my argument is rubbish, and you even didn't notice that I was talking in general about these events, even if the graphs were as an example from the US (because why would you care about anything else).

Pay more attention, don't just anticipate some moronic answer you think other people will give. The whimsical US political discourse about just about everything, actually, isn't the only viewpoint.

In Australia, at least, most workers' superannuation is invested in the markets' so yeah, here they do care.

You don't explain at all why my argument is rubbish — ssu

I explained in detail.

IPOs have no impact on the market or in capitalizing businesses. I told you why. Anybody who understands IPOs beyond what they google understands the situation.

You apparently were blissfully unaware of CDSs and their role in the Bush Meltdown, until I pointed it out to you.

You can't rebut the facts so you post a long-winded skein of more rubbish.

Meanwhile, the critical fact remains unscathed - the vast majority of US workers have no ownership of equities. Period.

The vast majority of US workers have no pension of any significance - they were destroyed along with unions. Pensions are a luxury of the rich.

Most workers depend on Social Security for retirement, which is barred from being invested in the market. So ups and downs in the market don't affect it.

A growing number of US workers simply can't afford to retire so they work until they die.

I think super funds are a good alternative to/ augmentation of social security pensions, but for them to be invested in the markets is a bad idea. Maybe government bonds...

Well, the Social Security Fund is invested almost totally in special treasury bills, which are the safest investment on the planet.

The concept of SS is that it is not an investment, but a guaranteed payment. So the point is not to maximize returns, but to make sure the fund is able to pay out the promised benefits as people retire. In that respect it's the most successful US government program ever. It's the largest most solvent fund on the planet. Noting is even close, despite all the rightwing agitprop against it.

You apparently were blissfully unaware of CDSs and their role in the Bush Meltdown, until I pointed it out to you. — Landru Guide Us

Blissfully unaware? Landru, old man, you seem to totally forget our discussion years ago. But oh wait, you came to the site in 2010, not when were discussion in the old PF about the crisis.

Again you are inventing your whimsical strawmen is obvious. When you make arguments that the stock market isn't a competitive way for companies to get finance, then I have to speak in general terms. This wasn't about exactly the US financial crisis, it could be about various financial crises. I could refer to the banking crisis in the Nordic countries in the early 1990's.

So now you think I'm blissfully unaware about credit-default-swaps. Lol. Remembers me when I started on the old PF in February 2008 a thread "the oncoming Banking Crisis", well before Lehman disaster in September. Had then good discussions with Unrealist42, Benkei and Fried Egg also in other threads we then had a lot of talk about the issues. Derivatives were then debated. A lot of people in PF then weren't going with the media, which I remember declaring that the crisis was over (and subprime was an unimportant controllable blip). Mind you that from this site I got the first warnings that the then called "Goldilocks"-economy was in trouble (when I joined back in 2007). Have respect for those members.

But I was ignorant about until you now informed me. Should I add personal hubris to the repertoire of condescending answers?

How about CDO's, the collateralized debt obligations, not just credit-default-swaps? Must have just google them up too. Or why you don't just refer to over-the-counter derivatives, the perhaps correct term.

But Ok. I mean I am used to Landru comments from Landru, and we do disagree lot (sometimes agree, interestingly), but now it seems it's not even about the subjects, but just assumptions what one is supposed to write.

Is this anger over Trump or what? I don't know.

This sell-off is an odd one in that it seems to be driven by good news (the oil price collapse) and irrelevant news (the China stock market losses). Probably neither are at the root of it. Financial reporting is almost all guess work and post hoc narratives.

It is looking more and more like a good thing, however - a loss of trillions for the rich who own most of the market. The less money the rich have, the better off we all are. Recessions are always caused by income gaps and too much money in the hands of bubble-creating rich people. I would say that this sell-off is actually a good sign that the economy will not enter a recession soon, despite 7 years of (sporadic and modest) growth.

I suspect most of this money went into T-bills, which is good for the country, especially if we can oust the GOP congress and start investing in infrastructure on low rate bonds.

It's neither the argument of a deflationary collapse either.

This sell-off is an odd one in that it seems to be driven by good news (the oil price collapse) and irrelevant news (the China stock market losses). — Landru Guide Us

China isn't as irrelevant as you may think. China has an effect on the global market today. Long are the time since the Chinese economy was the size of the Netherlands. Yes, the Chinese statistic are exxaggerated, but there has happened a real economy growth sprint on a historical level in China.

The whole raw materials "bubble" happened because of the historically huge Chinese investment program. Yet as you said Landru (I'll have to give one thing right), traditionally lower oil prices would mean higher growth rates, yet that has to materialize. It is odd, I agree.

I think at least one of the reasons is simply the dominance of day traders in the global market and simply speculation. All time high puts in oil prices. Cushing and other storages are quite full. Rig count is falling rapidly. Again these rollercoaster rides that happen because of speculation. No need to try to rationalize the swings by looking at some fundamentals.

I suspect most of this money went into T-bills, which is good for the country, especially if we can oust the GOP congress and start investing in infrastructure on low rate bonds. — Landru Guide Us

That Manhattan Project you have wished will not happen. Sorry to say that, even if it would mean good things to the whole World.

Obviously the current economic problems are directly related to oil prices dropping, which comes from the US overproducing shale, right?

The US is one of several nations producing more. The world will run on oil until it runs out of oil. It isn't as if everyone is pumping it up from the depths and then storing it in big tank farms, because no buyers are interested in burning it or making plastic out of it. China's economy has slowed down by one or two percent but it is still chugging along at 6% annual growth rate. My guess is that most of the oil is getting used -- just at a lower cost.

So what is "over production"? From a climate warming perspective, most of it is over production.

Correct me if I am wrong, but perhaps the margin between too much oil and not enough oil probably isn't all that large at any given moment. The margin nevertheless makes a big difference. If demand falls, the profits to be made are reduced, and then the product is worth less. If profits are reduced (not necessarily eliminated) some operators stop producing and wait.

The Saudis are, apparently, making enough money on oil to take the risk of lowering the price by pumping away, partly to drive US wells out of production (or producers out of business) and partly to keep Iran from getting too much income from its oil. In the US, leveraged operations can't stand a large fall in profitability, because they have a lot of loan payments to make. They go broke. Production is reduced.

Obviously the current economic problems are directly related to oil prices dropping, which comes from the US overproducing shale, right? — discoii

There's a huge number of shorts on oil, so basically it's "the casino" that is responsible for the huge drop.

Shale oil production isn't economic at all at these prices. It's more in the 50-70 dollar range. Yet Shale Oil producers are basically waiting to overcome the low prices (and not go bankrupt). A "fundamental" reason is that Saudi Arabia has and is pumping as much as possible oil. The reason is that a) It's fighting a war in Yemen and needs income and b) it wants to hurt Iran and also the Shale producers with low oil prices. That hasn't stopped Shale production. But rigs are being shut.

The Saudis are, apparently, making enough money on oil to take the risk of lowering the price by pumping away, partly to drive US wells out of production (or producers out of business) and partly to keep Iran from getting too much income from its oil. In the US, leveraged operations can't stand a large fall in profitability, because they have a lot of loan payments to make. They go broke. Production is reduced. — Bitter Crank

Well, the Saudis are burning up their cash reserves at an alarming rate. But they are willing to wait it out and not decrease production in order to inflict pain on Iran, their arch Shi'ite enemy, who is not only harmed by lower oil prices, but lacks cash reserves to weather the storm.

Meantime, Iran has just returned to the world market, thanks to the Obama deal, further depressing prices.

It's a perfect storm for cheap energy, and mostly the US middle class benefits. So I'm all for falling oil prices; the fact that the rich stockholders in China and the US are suffering only adds to the delight.

The US has drastically decreased the amount of oil that they are importing, starting since 2013 (which was the year that fracking and shale really started taking off. All these other economies that are oil economies are dependent upon their selling oil at a certain price to keep themselves going (like Russia, the OPEC nations etc.), and other countries are dependent on these most recently richer nations for business. The handful of rich people that own the oil companies also, in turn, use it to buy up ownership of companies in the investment markets, including the stock market. Whenever oil prices drop, a major section of the rich suffer from a profitability squeeze, and as such, start selling their shares in the market. And this one major explanation for the current market drop.

I am unsure if this is true, but all the statistics I've looked at point to it being true.

So, this explains a lot. If banks are making profits, then people must be paying back their debt in droves. This would explain the weak demand for oil. Add to that cranked up production of oil all over the place, and we might be in some, to use an economics term, deep shit my friends.

It really is the case that a few people do own a great deal of the wealth -- not just the wealth of the US, but the wealth of the planet.

The richest people in the world, according to Forbes Magazine--1,826 billionaires--are worth a little over 7 trillion dollars. Less than 2000 people. Who are they? Nameless, faceless, unknowns? No, for the most part they and their sources of wealth are very recognizable. Most of them own businesses of various kinds. They own product manufacturers, retailers, banks, heavier and lighter industries, real estate operations, all sorts of various kinds of businesses: Among them are:

Microsoft, Berkshire Hathaway, Zara, Oracle, Koch, Walmart, L’Oreal, LVMH, New York Mayor Michael Bloomberg, Amazon, Facebook, casinos, Google, ball bearings, Mars candy, H&M, George Soros, Nutella, Nike, Aldi, Trader Joe, publishing houses, newspapers, Sunglass Hut and Lenscrafter, beer, Dish Network, Lidi and Kaufland, Apple, Disney, Dell, BMW, Anheuser-Busch InBev, and various hedge funds, investment and real estate, oil, media, IT, pharmaceuticals, and so on.

These 1,826 people's wealth is greater than the combined wealth of much of the earth's population (assuming that the assets of the world population adds up to less than $7 trillion).

Of course, 7 trillion dollars isn't all the wealth, by any means. Real estate accounts for a lot of stored value. Other entities such as corporations (and their stock holders), account for a lot of wealth above and beyond $7 trillion. But as Landru has noted, however you look at it -- the wealth which exists is NOT divided up in any way approaching 'equitable'.

The handful of rich people that own the oil companies also, in turn, use it to buy up ownership of companies in the investment markets, including the stock market. Whenever oil prices drop, a major section of the rich suffer from a profitability squeeze, and as such, start selling their shares in the market. And this one major explanation for the current market drop. — discoii

Well over 90% of any commodities like oil are just "paper" transactions, no physical commodity changes hands, the casino play. And why would the rich suffer? They only suffer if they have to sell their stock cheap. Who suffer are the countries that desperately need oil income. The actual seller and buyers of a commodity are just price takers. Price volatility comes from the shorting of price and other casino games.

Actually now you have a similar condition with oil as was during the financial crisis, oil price going down with speculators having to cut their losses and selling while other speculators renting oil tankers as storage for the oil to sell it later with a profit.

Furthermore, one should remember that the biggest oil companies are state own entities, the old western companies like the successors of Standard Oil aren't the biggest producers.

(somewhat old graph, but still it's something like that...)

For the record, I use 'suffer' here to mean simply a negative turn of events insofar as their profitability goes.

As I see it, there isn't that big of a difference except juristically as far as state owned versus privately owned trust funds go. As far as they are actors in the market, state actors are simply more privileged investors, in many cases, with responsibilities also their citizenry (although, in practice, this isn't always the case; much of Aramco profits, for example, go straight to the Saudi lordships; I'm sure the same happens to other state run entities).