Moneybox: Be Afraid

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moneybox Be Afraid Why the markets are tanking. By Bethany McLean Posted Friday, Aug. 5, 2011, at 12:19 PM ET What is it with August? In August 1998, the emerging debt crisis that eventually took down Long Term Capital Management began, and in August 2007 the subprime-mortgage crisis began showing itself. Here we are in early August 2011, and the markets are tanking. On Wednesday, the Dow Jones Industrial Average snapped out of an eight-day losing streak and posted a teensy gain. Then on Thursday, the plunge--was it ever a plunge!--resumed, with the Dow closing down 513 points. That's the worst performance since the terrifying fall of 2008. Overnight, Asian stocks fell, as did European stocks. The news this morning that the economy added more jobs than were expected--117,000, lowering the unemployment rate from 9.2 percent to 9.1--provided brief respite. But by late morning, stocks were headed south again. The turmoil will likely continue. We're being hit all at once by a European debt crisis; a hangover from Washington's debt-limit fight; growth figures that indicate that the economic recovery, which was supposed to get us out of our own debt trap, is even weaker than we thought; and a strong suspicion that our trillion-dollar budget deficit leaves the government unable or unwilling to provide much stimulus this time out. (My repetitive use of the word debt is intentional, because debt is the heart of the problem.) To continue reading, click here. Bethany McLean is a contributing editor at Vanity Fair and the co-author of All the Devils Are Here: The Hidden History of the Financial Crisis. Join the Fray: our reader discussion forum What did you think of this article? POST A MESSAGE | READ MESSAGES Also In Slate So Are We Now in a Recession? It Sure Feels Like It. Going to Humanities Grad School Doesn't Make Us "Suckers" Wait, A-Rod's Poker Game Is Illegal? Does That Mean My Poker Game Is Illegal?	Advertisement
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