Market Meltdown Could Fuel Occupy Wall Street Protest

The Occupy Wall Street movement is a belated backlash against the financial crisis and the 2008/2009 market meltdown and subsequent bailouts. The timing of the protests, however, may just be coinciding with another major plunge in stock prices and a possible recession. In combination with the potentially explosive situation in Europe, this movement may get an unforeseen spike in popularity from people who are largely ignoring it right now. Average Americans who are either less informed about the precarious state of both the economy and the financial system as a whole, along with those who would just as soon ignore it for now, could get a major wake up call in the coming months. Although no one knows exactly how the current situation is going to play itself out, there is a very good chance that we are heading for another epic crisis. Yesterday, the S&P 500 officially fell into bear market territory, which is defined by a 20% decline from the highs, although the market has rebounded from those levels. The people in the know, are very worried. Just ask Fed Chairman Ben Bernanke. On Capitol Hill yesterday, he told lawmakers that the economic recovery is "close to faltering." Bernanke also said that he understands the frustrations that are driving the Occupy Wall Street protesters. He said, "On some level I can't blame them. Like everyone else, I'm dissatisfied with what the economy is doing right now." That is wonderful that the Fed Chairman can sympathize with Occupy Wall Street, but there is a more ominous way of interpreting his comments. Bernanke's visible frustration and also his call for lawmakers to come up with some solutions suggests that he is starting to question whether there is much of anything that the Fed can do to kick start the economy. The answer, of course, is no and maybe Mr. Bernanke himself is coming to that conclusion. The only monetary option that the Fed has left in its toolbox is more quantitative easing. We now know that QE2 was a failure. The stock market has given back all of its post QE2 gains, and growth has slowed to a crawl again. It didn't work, although it was effective at buying time. The Fed's quantitative easing program also appears to have been at least partially responsible for unleashing a wave of uprisings and revolutions across the world, which were sparked, in part, by skyrocketing food and energy prices. It sure didn't do a whole lot to promote stability, and it would appear that things are going to continue to unravel. The catalyst will likely be a Greek default and then a rapidly spreading contagion in the Eurozone as investors continue to yank money out of sovereign bonds in the PIIGS countries. Without access to their bond markets, these countries could grind to a halt, destroying the global economy in the process. European banks would also suffer catastrophic losses in such an event, and would need to be bailed out. Speaking about a potential default, Bernanke said "So it's a very, very serious risk if that there were to happen. And that's why it's extremely important that the Europeans continue along the lines that they have been on, which is to try to address that situation." That is an understatement. Who else thinks we may be on the precipice of another major financial crisis? The best trader in the world, George Soros. He has repeatedly said on record that we are headed for a depression (not a recession) and that the likelihood of a European implosion is extremely high. This summer, he told a panel that “We are on the verge of an economic collapse which starts, let's say, in Greece, but it could easily spread." Soros thinks that Europe is on the precipice of their own Lehman Brothers moment, and that given the weak economy in the United States this could cause a second Great Depression here at home. If the European economy locks up, given the unprecedented interconnectedness of today's world, the United States and China as well as the other major global economies will be trashed. Ironically, or maybe not so much, Soros has injected himself into the Occupy Wall Street movement through his backing of MoveOn.org, which has offered support to the protests, whether it is wanted or not. All of this sets the backdrop to what could be a pretty substantial social movement depending on how things develop. If the American people take another 40% hit in their 401ks, the current dissent could get a whole lot louder. Given the revolutions that we have seen in the Middle East as well as the uprisings that have been occurring in Europe, one has to wonder if we are not at the beginning stages of a much larger global movement where citizens begin to demand accountability from both their governments and economic systems.