The Stock Market is Falling and Everyone is at Fault

Why is the stock market falling? The answer is very simple. The global economic situation is in peril and not just the fault of the U.S. We can blame Europe and Asia too. The problem stems in the lack of U.S. economic growth and the sovereign debt crisis.

The Debt Crisis

While everyone in America was holding their breath waiting for Congress to act on the debt ceiling the stock market was held steady during the entire month-long spectacle. However, as soon as the bill was passed the stock market plunged right away. Despite the fear mongering, the lack of a debt ceiling increase by the Congress and possible default did not have very much to do with the current fall of the stock market. The stock market is falling for very different reasons.

The Euro

The ongoing European debt Crisis with the so-called PIIGS countries which include Portugal, Italy, Ireland, Greece and Spain has been a great concern for markets. The continued strain on the banking system and the continued question over the ability of these countries to pay their debts. This is causing stock markets throughout the world to decline rapidly. The falling markets in many international markets is really in fear of a European default and the potential collapse of the Euro. There is even a rumor that the European Central Bank has started to knock on the Federal Reserve bank in New York for money.

The U.S.

Despite the debt ceiling crisis, the U.S. economy has had another problem and that is the inability to add jobs and grow consistently. Regardless of the raising of the debt ceiling the United States has 14.3 Trillion dollars on debt which is 95% of GDP per annum and this is a situation that is still a drain on the economy and worry for world-wide markets. Although, weakened, the United States still has the largest, most innovative economy in the world and so actions and problems within the United States very much affect others. Many analysts believe that over the long-term without a plan to pay back that debt it could become unsustainable. The markets are falling in response to something that many in the community can see.

Lack of Global Demand

So the U.S. and European Union have a debt problem but that does not explain the major draw down in Asia and thesubsequent stock market falling in South Korea, Japan, and India. The reason for this is the fact that for all the growth in emerging markets their export strategy has been based on people in the West buying their goods. With overall global demand down as led by the West this means lower economic numbers for everyone. World markets are reacting accordingly.

The World is Saddled by Debt

Many analysts have said and it bears repeating, there is too much debt within the system and much of this sovereign debt has to get off the books. Re-payment plans have to be implemented for much of this sovereign debt before economic growth can begin and certainly countries with less debt will fare far better than those with a great deal of debt. Forget raising the ceiling, it is time to for countries around the world to pay off their credit cards.