The MSCI Asia Pacific index lost 1.5 per cent with Japan’s Nikkei 225 Stock Average off 2.2 per cent, Australia’s S&P/ASX 200 index down 1.7 per cent and South Korea’s Kospi Composite index 2.1 per cent lower. (CNN online, May 18, 2012)
Stock markets the world over are rocked by the “uncertainty” in Europe. Asia is a good example, as is the United States, where this week has seen four straight days of stunning losses. Spanish banks have been downgraded, and speculation is rife about whether Greece can stay in the European Union. The euro is in crisis, and German chancellor Angela Merkel keeps telling Greece to please get a stable government in place, and to deal with the unrest that caused the government that approved her fiscal austerity pact to be ousted by voters. France has a new socialist president in Francois Hollande, and it’s not known whether his growth-oriented politics can work with Merkel’s commitment to balanced budgets. Portugal and Italy face national debt that far exceeds the EU economic guidelines of 3% of GDP, and whether Ireland has a handle on its difficulties depends on who you talk to.
The high-pitched reporting of all this gets on my nerves. It’s all true, but the way it’s being framed feeds stock market jitters. During Francois Sarkozy’s presidency in France, he and Merkel pushed debt reduction initiatives through, and the resulting austerity brought hard times to the countries in the worst shape, notably Greece. This spring, voters in EU countries are moving left, largely in order to soften the economic austerity. Greek depositers in huge numbers have even withdrawn euros from banks, in the fear that Greece will return to the drachma.
I call that a correction. I say we hang in there while Europe gets its voters and its economic policies together. In democracies, it’s inevitable that when governments make bold moves, as Sarkozy and Merkel did, the voters will react and even be p0larized. That’s not necessarily a bad thing. It forces said governments to find a pill bitter enough to address the problem, but not so bitter that voters won’t swallow it. The US is going through something similar with regard to medical care and the restructuring bill that the Obama administration pushed through. If there’s a decent dialogue, the people and the leaders who are trying to fix things will agree on a compromise.
I know, when stock market commentators talk about a “correction,” what it means to the 99% is that we lose money, sometimes lots of it. We’re in no mood to hear about how natural the process is, or that the pendulum will swing back to a rising Dow Jones average. But, our bad mood should not nullify rational thought. The reality of the stock market is that if investors hang in there over time, they realize gains. That’s proved true over and over again for the past 65 years.
Likewise for Europe. These are painful times. People are losing jobs and homes. Small businesses are failing. The suicide rate in Greece has increased. People are starved for hope. In such times, those of us who write about the news, have a responsibility to place events in a framework that favors a sense of proportion. Certainly, it would be insulting to downplay the suffering. But it’s irresponsible to paint a picture devoid of context. The context right now is that Europe is in transition between reckless spending and fiscal austerity, and that the only sane thing to do is to keep a sense of proportion during the pendulum swings.