The Dow plummeted almost 1,000 points Thursday afternoon, an all-time intraday record loss, before roaring back. The wave of selling, which still has the markets on track for their worst day of the year, was sparked by growing fears that Europe's sovereign debt crisis will spiral out of control and further damage the crumbling euro.
As of 3:33 p.m. ET, the Dow Jones Industrial Average fell 403.19 points, or 3.71%, to 10460.85, the Standard & Poor's 500 dropped 42.55 points, or 3.65%, to 1123.35 and the Nasdaq Composite lost 90.74 points, or 3.78%, to 2312.45. The FOX 50 sank 32.33 points, or 3.79%, to 820.88.
Everyone and their mother will rush to the television to "analyze" why this is happening. In a word, it is PANIC. There's no reason for this kind of volatility. Still, that panic has an underlying truth.
In this case, Greece's out of control spending caused it to need a bailout. Then, when the country did receive a bailout, the people of Greece revolted when the strings attached to the bailout included increased taxes and cuts in entitlements and pensions.
Yesterday, I ate at a diner in which the waitress said that all Greece had to do was cut benefits years ago. Today's riots show how naive such a thought is. Even with the specter of the country's impending bankruptcy the people were still rioting in response to cuts in entitlements.
The reality is that many countries, ours included, have debt structures similar enough to Greece and no one believes that the governments that rule these countries have the stomach to do what is necessary to fix their fiscal situations.
President Obama has done a two step on most of his policies. He claims that taxes haven't gone up. He's claimed a lot. One thing he can't avoid is the fact that our deficit is nearly two trillion dollars and now, with Greece, deficits and debts become even more of an issue. Fiscal hawks will become even more in vogue as a result of Greece. That's because that is what we need. To avoid the fate of Greece our government needs to make the tough choices the Greek government couldn't make.