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Apparently, the bloodletting was not over when the Dow Jones Industrial Index (DJIA or “DOW” for short) plunged 311 points last Thursday. Hype over the looming “14,000 point milestone” wafted through the press for days after the DOW leapt 283 points on July 12th the day the Democratic Congress announced it would be voting to pull all U.S. forces out of Iraq within 120 days. After a nasty 416 point loss in early March to close at 12,234, the DJIA climbed an astounding 1,600 points in just four months to close at 13,861. Despite that precipitous climb, it took four days to climb the last 50 points to cross the 14,000 threshold on July 20th. Then the bottom fell out, losing 149 points the next day, bouncing back a little only to lose 226 points on Tuesday, 311 on Thursday, and now another 208 points on Friday, making this the worst week for the DOW since March 11, 2003. Hmm, seems like I remember something significant happening in March 2003, but I can’t quite put my finger on it. (the DOW leapt 282 points two days before the invasion of Iraq on news that war might be avoided.)

So, why did the DOW see its worst week since the invasion of Iraq (and the worst week for the S&P 500 since September 11th) after such a rapid 1,700 point climb in just four months? As I wrote yesterday, interest rates were cut to the bone after 9/11, boosting new home sales to record highs as unwitting home buyers agreed to “adjustable rate” mortgages with low monthly payments. Those mortgages are responsible for the skyrocketing number of foreclosures and defaults as interest rates were increased to attract foreign investment to pay for the war in Iraq (rising steadily since June 2003.)

Add to that the price of oil jumping $2 a barrel to within $.01 of its all-time high of $77, and you have all the ingredients for a floundering economy.

Ironically, the same day the DJIA loses 208 points, the Ford Motor Company reported its first quarterly profit ($750m) since mid 2005. A prime factor in the turn-around? The announcement last year that it would close 16 plants and cut 45,000 jobs in a massive restructuring effort to stop the hemorrhaging of cash since mid-2005. Rumors that Ford might divest itself of its share of British car-makers “Land Rover” and “Jaguar” were also confirmed on Friday, which would mean another influx of some much needed cash into the Ford coffers.

American sales to Europe accounted for the majority of recent corporate profits to help supercharge the DOW in recent months, but Americans just aren’t purchasing like they used to. With less money in their pockets due to higher mortgage payments, record high gasoline prices, and the price of everything going up as retailers are forced to offset their own energy costs, hurts retail sales and American business. If I’m right and the market is falling (despite otherwise good economic news) because Americans are spending less thanks to diminishing income, last weeks slide isn’t over yet.

One thing that I hear frequently is talk about “record low unemployment rates“, usually in the context of “proof of a strong economy“. But what these pundits don’t seem to understand is that a low “unemployment rate” does not equal “low unemployment“. While the RATE of job loss is very low, the rate of job “HIRINGS” is almost non-existent… unless you count the “industry-killing” Green movement, where “eco-friendly companies” are about the only sector of the job market seeing huge growth.

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