Falling Stock Markets? Blame China.


Over at Wonkblog, Ylan Mui writes about the plummeting stock market:

Is this the beginning of “Rate Rage”?

You could be forgiven for thinking so, judging by all the blame that’s been heaped on the Federal Reserve for the selloff in stock markets over the past three days. The blue-chip Dow Jones Industrial Average has plunged 500 points, and the broader Standard & Poor’s 500-stock index erased its gains for the year. Markets Friday morning were already beginning to edge down.

We must read wildly different stuff. I haven’t noticed anyone blaming the Fed for falling stock markets. The headlines have all been like this one in the Wall Street Journal: markets are dropping because investors are afraid that China is about to go belly up. As Mui points out, the Fed’s actions have been widely anticipated, and the timing of the market drop doesn’t really match up with anything new from the Fed anyway. It does match up with investors finally getting nervous after weeks of increasingly bad news from China.

In any case, this is yet another reason the Fed might want to rethink a rate rise later this year. The global economy is not looking especially robust at the moment, with Europe barely growing and China possibly entering a serious slowdown. We don’t really need to add to these problems.