Who's to Blame for the Stock Market Meltdown?

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U.S. stocks were decimated today and the country's financial experts are trying to assign blame as they digest the day's massive losses.  To run through the carnage, the Dow dropped 512 points, or 4.3 percent, the Nasdaq shed 136 points, or 5.1 percent, and the S&P 500 lost 60 points, or 4.8 percent, which makes for the ninth largest single day point loss in history. Scary, we know. Like with any stomach-sinking market plunge, there are a number of different ways to slice this. Here's who you can blame:

It's all our fault  MSNBC host Dylan Ratigan chooses to blame us, or rather, our Washington-based political system. He says investors are spooked because they saw the inability of Congress to solve basic problems during the debt ceiling fiasco. “Look at what we have received in the past two weeks from our government," he says. "The debt ceiling debate was the American lawmakers, President and Congress putting on an illustration for the world about how they intend to solve problems as a group.  They exposed their lack of integrity and that fundamental evidence is so repugnant to the investment community.  So what the market cares about is not moral judgment…. what they do care about is the inability of the government to solve problems in any context.”

It's not our fault At a press briefing, White House press secretary Jay Carney said markets "go up and down" and largely noted a number of global issues in light of the crisis. "There is no question that we have -- this economy has faced headwinds this year, a variety of them including the earthquake and tsunami in Japan, the increase in oil prices, energy prices that resulted from the unrest in the Arab world and the situation in Europe." On MSNBC, Bill Fleckenstein of Fleckenstein Capital largely agreed that outside factors were to blame.  “Folks need to take a step back and realize that this reaction that happened today was not a reaction to the debt ceiling," he said. "We’ve done that dance many times before. This was, as you said — we have broken financial system, and capitalism has been broken in this country for some time.  Now what’s happening is — it’s a sovereign debt problem.”

We don't know whose fault it is  "If anybody tries to tell you we’re seeing 'fears of a double-dip recession,' or somesuch, ignore them," writes Felix Salmon at Reuters. He emphasized the importance of not assigning blame or listening to those who were.

Fears of a double-dip recession do not appear overnight, and do not send markets down 3.5% in the course of a morning. When vague “fears” are cited as the prime reason for a sell-off, you can be sure that in fact there’s no reason at all. Markets are volatile things, and sometimes this kind of thing happens. If you can’t stand it, you shouldn’t be invested in stocks in the first place...

In general, I’m not a fan of extrapolating broad macroeconomic hopes and fears from the first derivative of the S&P 500. We’re at 1,220 right now: that’s low compared to the 1,350 of a few weeks ago, but it’s high compared to the 1,120 we saw a year ago — and certainly compared to the 735 we saw at the depths of the sell-off in 2009. If you look at levels rather than deltas, there doesn’t seem to be any big reason to worry — the stock market is showing a reasonably healthy optimism about future long-term growth

This article is from the archive of our partner The Wire.