On Wednesday, the Dow Jones Industrial Average began down sharply and only got worse from there. The Dow closed more than 500 points in the red, off 16 percent in less than three weeks.
Just a few weeks ago, the Dow was close to 13,000 points and the debt ceiling debate seemed far removed from the financial world. Two weeks before the debt ceiling debate, the big money guys said, 'don't worry about it.' After all, nobody believed Congress would drive the car off the cliff.
Then, Louis Navellier said the markets weren't reacting to the Congressional debt debate and investers weren't concerned about what was happening. On Wednesday, Navellier was one of the featuerd speakers at the Money Show -- a gathering of investment executives in San Francisco.
"In retrospect, if we read the S&P, they didn't like the political theater," Navellier said, adding that the S&P downgrade ignited the selloff.
The downgrade was sparked by the debt ceiling crisis and financial reporters wouldn't let go.
"When the debt ceiling was resolved with an extension, they kept talking about a U.S. default," said Navellier, "so it's like they started a snowball and no one would stop."
Navellier says markets around the globe are feeding off each other's fears.
"The bottom line: Markets don't think, they just react," said Navellier.
So do consumers. Fear over the slumping housing market and a slumping jobs market, consumers are 70 percent of the economy, but they're not spending money and so the slump continues.
"Vicious cycles, like this, can only be reversed by one thing, and that is the government being the purchaser of last resort," said UC Berkeley Goldman School Professor Robert Reich.
Reich, who is a former labor secretary, says the last stimulus didn't work well enough because it wasn't big enough, and now another seems politically impossible.
"My hope is that, with Congress back home listening to their constituents, they will hear over and over again this is not a debt crisis, this is a jobs and wage and growth crisis," Reich said, "and you've got to take action. We've got to have a jobs bill. People have got to be put back to work."
Right now, President Obama is calling for an extension of the payroll tax cuts, an extension of unemployment benefits and something Obama calls an infrastructure bank to fund rebuilding of roads and bridges.
Reich calls them "policy miniatures" that won't come near to dealing with the fall off in demand that is driving the economy back toward a recession.
