Stocks Off Sharply as Market Upheaval Grows

No, because an economic crisis is a fall in economic output.

The point is that "undesirable wealth distribution" is not what an economic crisis is. If 400 people controlled everything, the world wouldn't be a great place to live, but the economy would probably be more stable.

"Historically speaking"

Historically speaking, when has the Fed kept interest rates at ZERO for 7 years? After pumping QE full throttle at $80B/mo? The economy has been in continuous "recovery" mode since '08, but not much has actually recovered. The market is going to collapse my friend because, historically speaking, we are in dark, uncharted territory and have lost our way back.

I find it fascinating how this discussion goes, Do we differentiate between "healthy" and "strong" ?

The US economy is, as far as I can tell, tethered in a macroeconomic sense, to the bill of the very expensive land wars it recently fought. The cost to the economy both in terms of government spending and workforce depletion as national guard troops were mobilized for duty in Iraq and Afghanistan.

American worker productivity has remained high, which has kept real wage growth low, as employers leverage they "be thankful you even have a job" meme over the heads of employees who perhaps just scraped by in the great recession or spent months or even years unemployed.

America's largest trading partner, China, is running a partially managed economy with a fiat currency that is priced more on government policy than market realities. That pricing has lead to some unsustainable conditions in the Chinese economy which are being "addressed" by some pretty big moves (currency devaluation is not something you do lightly in the worlds second largest economy).

So the interesting question is how does the world see it? And how will it play out? Everyone has their bets, but and you can read about some of them in Barron's or the Economist or the WSJ.

The current disaster is Chinese. By devaluing their currency they are effectively "taking value" from people who were trading with them relative to the partner's home currency. So lets say someone like Apple contracts to buy 10 million iPhone 6 baseboards, in Rmb at an exchange rate of $100 per board, and now when it comes time to actually take delivery and buy the boards they cost Apple the equivalent of $150 each. Apple needs to pony up an additional half billion dollars for their phones. This then will hit their bottom line in terms of revenue, which means their stock price will go down (they won't be as profitable a company) and so funds holding Apple will lose their value in proportion to their Apple stock. And China has done this by devaluing its currency.

It doesn't change how strong Apple's market presence is, or that they can sell a phone for a ton of money, but it changes the cost/value equation faster than Apple can respond and so there is a disruption in their earnings. That will ripple across a lot of companies.

But is that a 'health' issue for the American economy? Not really. Rather it puts pressure to restructure the costs of the economy into a different place. People still buy iPhones and will for the forseeable future. So the economy is still strong, but if the price of those iPhones doubles their volume will likely fall and so Apple's earnings might be 'weak'.

The stock market is responding to the adjustments in China, internalizing the lack of fiscal oversight in that economy, and pricing it into the value of companies that do a lot of business there. I expect a hell of a correction and some interesting new markets opening up (like India, Vietnam or Thailand if the Thai can get their governance under control) as the cost of doing business in China begins to more accurately reflect the real costs of doing business there.

EDIT: As folks have pointed out the currency hit is reversed, Apple would get its parts for less if they priced them in RMB vs Dollars. Any RMB they were holding in their cash pile would have lost value, so to the extent that their sales in China have not been moved into Euros (we know they aren't repatriated into Dollars for tax reasons) are going to buy less than they did before.

>Thoughts on who's doing all this downward trading?

I imagine at least some of it is hedgies being crushed by oil sub-$40 as well as the AAPL correction (which was the #1 holding for a lot of funds). Lots of paper being re-positioned.

It was absolutely nuts this morning. VIG, which is the dividend growth ETF, composed of large-stock US companies, was down 18% at one point! I couldn't get any buys filled, though.

Honestly, I don't think you have a clue what you are talking about. You aren't wrong, per-say, you just list all things that have literally 0 to do with the actual problems. Its a very common political trick for an ideologue like yourself to grab a bunch of things they think are bad and argue they are the cause of all your ills. You are approaching things from a "this is good for people, it must be good for the country" point of view. A national economy is not a person and doesn't function on the same economic rules as a person does.

The real problem in this country, frankly, is the Federal Government has been badly mismanaging economic & tax policy for 30+ years. They've repeatedly used short term solutions and short-changed everything from highways to R&D in the name of military, taxes, & social spending. Many long term investments in physical goods [e.g. buildings] are really only rated for a 30ish year timeline for depreciation for a reason.

That combined with the demographic shifts, labor market arbitrage, massive private debt load are the actual problems. Did you bitch when the private debt to gdp was over 120%? Did you even think about it, honestly?

I'd list sources but I honestly think you wouldn't believe me.

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> A vanishing middle-class is not healthy.

By that logic, the US economy has in the shitter since the 1980s.

> Inflating assets is not healthy.

Actually, inflating prices is the definition of healthy and has been for a long time in economic theory. No economist argues we should have deflation.

> QE is not healthy. & 0% interest rate for several years is not healthy.

Having deflation would be less healthy than 0% interest and QE.

QE is also over.

> 100+ % debt:GDP ration is not healthy.

That isn't a serious issue as long as the US is considered the reserve currency. National debt doesn't have a direct correlation with economic growth.

http://www.theatlantic.com/business/archive/2014/09/governme...

> Government Debt Isn't the Problem—Private Debt Is

> What was the big problem? Look at the line representing private debt. It clearly is not parallel to the GDP line and, indeed, reflects a rapid growth of private debt relative to GDP.

> Look familiar? Time and again, that’s the story we found: A major financial crisis is preceded by a runup in private debt relative to GDP. In fact, there seems to be only one other ingredient required for a crisis: that the absolute level of private debt is high to begin with. We found that almost all instances of rapid debt growth coupled with high overall levels of private debt have led to crises.