As the Dow Jones Industrial Average continues to fall, uncertainty is clouding the world’s view of the current economy. And although it’s a scary thing for some, it’s not necessarily a bad thing, says CNBC Chicago Mercantile Exchange floor reporter Rick Santelli.
During an appearance on the Wednesday episode of Sean Hannity’s radio program, the so-called “father of the tea party movement” offered his views on the implications of the Standard & Poor’s downgrade.
“You know, you really get to see the world, Sean, for what it is when there’s anxiety and financial upheavals,” Santelli remarked. “And what do you see as we go through that exact point in time, the last couple of weeks, today specifically when the Dow is down over 500?”
“What you see is that the rating agencies kept jumping to reaffirm the French and the French banks, but the French bank stocks are plummeting,” he continued. “S&P downgraded the U.S. and all you’ve seen is interest rates move to historic levels.”
And this, albeit ugly for a lot of investors, shows “the emperor without clothes,” or the real value of some assets.
“[Y]ou really get to see the emperor without clothes during anxiety. What value represents to an investor who is filled with anxiety is the only reality that matters, Sean,” he continued. “What the world is seeing now in the global marketplace are market forces finally acting on the reality of the situation he explained and the solutions aren’t working.”
And all the policy measures to date were just “Band-Aids” delaying the inevitable.
“So, what we’re doing now is what I’ve been trying to say for years — that Band-Aids don’t do anything,” Santelli said. “Sooner or later if you don’t address the problems — that markets will force you to address the problems. That’s happening now and as scary as that sounds listeners, it’s really the most healthy thing that I’ve seen in the last three years because what it’s going to do is establish a real bottom.”
As to the current leadership, Santelli reminded listeners what President Barack Obama said as a candidate about the deficit.
“Listen, I never like to speak to politics, but I like to use politicians’ words,” Santelli said. “I have a pretty good memory. Our president said he would cut the deficit in half in his first term. OK, that’s it. I rest my case.”
And that is part of what’s wrong in Washington, a lack of politicians living up to their words, Santelli said. He bucked the conservative trend, even admitting he disagreed with himself, but explained that higher taxes could be the answer. However, he said the government isn’t in a trustworthy-enough position to raise more revenue.
“I couldn’t even talk about [tax increases] until we got people who are trustworthy,” he said.