The rise of the new gilded age – Massive market volatility is a dramatic sign of an unhealthy economy – 14 of the 28 biggest percent declines since 1950 in the S&P 500 have come after 2008. Two of those volatile days have occurred in August of 2011.
Aug 14, 2011
Massive stock market volatility is not a good sign for the economy and like an EKG is telling us something is troubling the heart of the nation. The most tumultuous times in the stock market have occurred during times of great economic uncertainty. August of 2011 has quickly brought back the troubling memories of 2008 and 2009 when the economy was melting down like the Wicked Witch of the West. For the middle class the recent stock market rally was nothing more than a sideshow. The real underlying economy has been falling apart like pulled pork for years so it is no surprise that we are witnessing massive volatility in the stock market yet again. Drops of 600 points followed by surges of 500 points are not healthy. What one would expect out of a mature economy is steady and solid growth, not volatility that is reminiscent of a hot streak in Las Vegas. That is however a large part of the problem with our current financial system. You have many investment banks that thrive on this kind of volatility making billions of dollars on options, derivatives, and futures even if these tools increase the underlying risk in the real economy. For all of the drama of the last week, the markets were changed only by one percent but the rapid reversal is signifying that market volatility is back in fashion again.