Since hitting their lows back in March, financial markets have rallied in the wake of last year's financial crisis. The Dow Jones Industrial Average (DJIA) is up 43 percent since March 9. But can it last?
It could be all given up with this rate of government spending according to CNBC "Mad Money" host Jim Cramer. Cramer, responding to a viewer e-mail on his Sept.8 program, explained what a higher national debt would mean to the average citizen and investors in the near and long term. He said expect the market to go down and higher taxes eventually.
"I know that this is going to mean our taxes are going to go way up," Cramer said. "I have to tell you this eventually means this market will come down. It is in when what I call the out years, not to worry about it yet."
Cramer also said if there wasn't some discretion exercised by Congress with the purse strings - Americans could see the financial markets face bear conditions.
"It weighs on me every day," Cramer added. "It should weigh on you too and if there isn't some discipline in Congress, we're going to be talking about a new bear market in 18 months if we don't get this stuff under control."
A textbook definition of the beginning of a bear market is a downturn of 20 percent or more in multiple broad market indexes, including the DJIA or the Standard & Poor's 500 Index (S&P 500), over at least a two-month period.
Cramer hasn't been alone in sounding the alarm about government spending and its eventual impact on the economy. A new study by economists Charles Rowley of George Mason University and Nathanael Smith of the Locke Institute and endorsed by Nobel laureate James Buchanan, says the Keynesian tactics employed by the Obama administration causing huge government deficits "will ultimately hamper the long-term growth potential of the U.S. economy and may risk delaying full economic recovery by several years." The study accuses the president of making Depression-era mistakes.
"[W]e know from history that when you have huge amounts of debt and huge amounts of government spending, contrary to what a lot of economists believe - that doesn't cause economic growth," Wall Street Journal editorial board member and senior economics writer Stephen Moore said on Fox News Channel's Sept. 7 "On the Record." "That actually causes more Americans to lose their job because you have this huge amount of debt and the government usually spends the money on inefficient things."
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I believe that in 18
September 9, 2009 - 10:17 ET by R D HelmI believe that in 18 months, this country is going to be mired in an economic depression rivaling that of the 1930s.
Job losses are going to continue, and the next wave of foreclosures is about to hit, and it is going to be massive. Soon afterward, retailers and other businesses all over America are going to be shutting down many of their facilities due to lack of business.
And it will get worse from there.
There is absolutely no good economic news on the horizon.
-Dave
Even when the government tries to kiss you, it is just a prelude to a good screwing. -Neal Boortz
This Has To Be...
September 9, 2009 - 13:56 ET by Wildcatter1980...the biggest "Duh!" statement of all time.
Anyone who understands economics knows you cannot keep spending money you do not have.
--
We need to stop calling them "Progressives" when in reality they are big government "Socialists" who no longer value the individual's rights to Life, Liberty and the Pursuit of Happiness.
Of course
September 9, 2009 - 10:23 ET by 10ksnookerAnother way to look at this is spiraling national debt is not sustainable for 18 months. But that is probably too much for CNBC to think about.
The Joker's plan -- Slavery by debt so large it can never be repaid, it's still slavery.
too optimistic
September 9, 2009 - 10:30 ET by jon_torlinI think what Cramer's saying is a bit too optimistic given what we've seen so far, but on the other hand, he is working for GE, so they might have seen what he was going to discuss and probably told him to lighten the tone a bit.
I also think it'll be a lot sooner than that, particularly if ObeymeCare gets passed and signed. That'll affect the economy (with or without the markets) for sure, and then of course the so-called Cap and Trade, another whammy.
Oh and did he say anything about how Congress wants to start taxing Wall Street?
-Jon
Re Mistakes
September 9, 2009 - 10:57 ET by slickwillie2001I somewhat disagree that the Bamster is making "depression-era mistakes." I believe he is following the FDR-path not to rescue the economy, but to gain and retain power, just as in the case of FDR. Alinskyism is all about accumulating and keeping power first; all other objectives are secondary. FDR was very successful at building up the power of the federal government over the citizens, and the Bamster is emulating him.
The forecast of a bear-market is one of the less-apocalyptic views. Others are much more pessimistic:
The Scariest Job Chart Ever: http://directorblue.blogspot.com
Currency Collapse -The Obama Legacy: http://directorblue.blogspot.com
Re out-of-control inflation and the destruction of the US Dollar; ask yourself who that hurts. Not the very wealthy, who can shelter income and in fact arbitrage to profit from it. Not the poor, who have no money or assets anyway. Not the federal government employees or Big Union, who are more or less on a COLA plan.
It hurts and in fact can destroy the middle class. The destruction of the middle class is the first objective of a communist revolution.
slick,
September 9, 2009 - 11:37 ET by R D Helm"The [destruction of the middle class] is the first objective of a communist revolution."
Bingo. You nailed it with that one.
-Dave
Even when the government tries to kiss you, it is just a prelude to a good screwing. -Neal Boortz
18 months?
September 9, 2009 - 11:24 ET by mattmI'd be surprised if it took that long.
I just don't get it
September 9, 2009 - 12:28 ET by sic721With the completely in-the-tank, pro-Obama, uber-biased, bury-the-truth 'news' coverage of cnn and msnbc, why in the world would anyone trust cnbc or cnnmoney for financial advice? If the parent companies marching orders are to lie and cover for how bad it really is, why would anyone think these 2 networks would be any different? I just don't get it.
"Life's tough.....It's even tougher if you're stupid"-John Wayne
Cramer is wrong about taxes...
September 9, 2009 - 12:33 ET by Robert17Raising taxes will not fix this, since we are already taxed at the limit. Only cutting spending will work.
Re: raising taxes. Isn't
September 9, 2009 - 12:39 ET by Jack BauerRe: raising taxes.
Isn't Cramer stating what he thinks is going to happen under the rule of King Obama -- not what he thinks should happen?
Inflation
September 10, 2009 - 16:38 ET by halpWell, for once I agree with Cramer. Though my feeling has been that it will be a lot more sooner than 18 months. A year ago I felt that we would start to see the signs at this time. And checking gold (what many view as a leading indicator for inflation) it's starting.