Strengthening Constitutional Self-Government

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Dow falls

"The Dow’s fall of 4.42 percent today was the worst single day for the index since July of 2002. The other major indexes also had a miserable day with the NASDAQ falling 3.6 percent and the S&P 500 falling 4.69 percent.

But it could have been much worse. Given the turmoil in the financial world, today could have easily been a repeat of Black Monday, the day in October 1987 when the Dow lost 22.6 percent of its value."

Discussions - 10 Comments

It's amazing how much of what's going on with the economy is ignored on this site. I predict that McCain lost the election today. He was likely to lose it in any event, but the economy will not stage a recovery before election day. It will be a basket case by then. And the electorate will vote their pocketbooks and against the party that occupies the White House when the financial system fell apart. All the efforts here to wish otherwise are pure bunkum.

That the legislative branch is in the hands of Democrats at this moment and passed the laws regulating the the financial industry, will presumably go unnoticed and unremarked. You are certainly correct that the economy and variety of other points of socio-political interest are often neglected on NLT. Oh well.

You are also right that IF the economy is a basket case the election will go badly for incumbents. Yet, the idea that Obama looks like a wonder of economic and executive management to the electorate is a bit of a stretch. A man who dreams impossible dreams does not seem safe at such a moment. Won't the electorate look to the man and policies and not just to party?

Yes. If the economy crumbles, Bush will get the blame as surely as Hoover did. You may wish the economy to crumble and for the American financial system to fall apart for your own reasons, but that does not seem guaranteed. The game is not over, yet.

Kate, I doubt I have to tell you that the President, and not the Congress, gets the blame for a tanking economy. You're right that Obama is not a shoe-in as a comforting expert on the economy, but his tailwinds have just stiffened considerably. I do think Obama's "message" of linking McCain to Bush's economy will stick a lot more now. McCain is incredibly vulnerable on the economy; his promise to cut earmarks and taxes are not going to sell in the midst of a financial meltdown. For better or worse, there is that "R" next to his name.

I don't WISH for the economy to fall apart; I've merely pointed out for many months that it's likely to do so if we continue our debt-based, leveraged, bubble-ridden, finance-driven ways. I take no pleasure in seeing the chickens coming home to roost - it's my economy too, for better or worse - but I do hope that we will do better in the future, particularly living within our means. Regardless of who wins the election, they will inherit a bloody mess and I do not envy either man.

Then we mostly agree. Yet, I do not see that in the circumstances, America will look at Barack Obama and say, "Now, there is a man with answers on the issues of the financial sector!" His policies shout "SPEND" and hint "tax" and that is likely to make the average guy pretty nervous. That guy still has to pay his debts, which is harder in the current economic situation. Maybe if Obama promises every indebted American relief, they will flock to him in naked self-interest, but many will wonder where the money for that is going to come from.

The whole matter of Obama's biography, the experience issue, argues against his looking anything like an expert on the national economy. If anyone is going to provide more of the same as the Bush Administration has given us in that regard (grievously) it is the Democrats. If Obama is going to retool his whole domestic economic message and promise to channel Milton Friedman or make Thomas Sowell his chief economic expert, then even I might prefer him to McCain. That's not going to happen. He looks and sounds mighty squishy on the sound national economy issue. People might believe the US could manage all he proposes in a great economy, but be much more skeptical in a bad one.

McCain may yet get the electorate to ignore the "R" next to his name and just focus on the name. Or else he might actually get us all to believe that "R" stands for "Reform" and not for "Republican".

Pat is right about the political effect, especially if things continue to get worse in seemingly random and anxiety-producing ways. If I were Las Vegas, I would bet on Obama. And I sure as hell wish I had gotten all my TIAA etc. out of the stock market. Of course, can't do it now.

Frankly, running as a smaller govt., supply side, tax cutting candidate in a financial crisis is a losing position. People want to know how govt. will help THEM. McCain was blaming Wall St. today at the same time he's promising to cut their taxes. This argument will lose. He really has no idea what to say.

Obama isn't much better on this, but he has a D after his name. He has been blaming Bush, which will be more attractive to voters who want to blame someone but can't vote against Wall St. And D's believe govt should help. Right now that's a winning argument. Because of Lehman's failure and the fallout, I am now confident that Obama will win. You may not like it, but them's the facts.

NLT ignores the economy because they don't know anything about it. [I don't know a lot either, but I talk to people who do] It's natural that increased turmoil in the economy will favor Obama-to that extent Patrick is right.

Deenan though forgets--or doesn't know--about the many successes in the economy for the past 10 years. Most of the Bush years had soaring GDP's. Who was raking in that cash, and where is it?

A lot of this money is sitting in private hedge funds, waiting for the market to bottom out. Then the private equity strikes for optimal profit. That means when the bottom hits, recovery will be fast (provided the government doesn't screw it up). Paulson and the Fed have been trying to trick the market and the investors into investing by "stablizing" the market with bailouts. Since Paulson let Lehman fall, perhaps he finally caught on that hedge funds won't be fooled by his attempt. They have way more $ than the Fed and are going to wait it out. Whenever the market sorts out, Goldman Sachs, and Morgan Stanley will probably be the only two investment banks standing. Then you'll see a rush of capital into the market. Will it be too late to help McCain? Time will tell.

But the problem with the mortgage industry is government involvement. Freddie and Fannie were semi-governmental agencies and hold half of the mortgages in America, including mine. My point in tossing in the article about the latest Bush mortgage bailout is that throwing more taxpayer money at the problem does not help.

Yet, I know you are right, that people want government to do something, even if it is the wrong thing and makes everything worse. Who knows? Maybe the Treasury Dept. doing something (again) will create an aura of stability and that will be enough. Anyway, Obama may blame Bush, but what would he have done differently, except even more of the same?

Yes, Clint, there is plenty of money out there and that money will probably go back into a market, but not necessarily our market. It would be a good buy, but I read that foreign investors are nervous about it, wondering what might hit next. People have been putting money into commodities, like petroleum, because of worrying about the stock market, which has not helped the gas situation, at all. That makes the economy look rocky, which effects the stock market.

Do you suppose foreign investors would be more likely to buy American if Obama or McCain were president? I wish it were a more serious distinction.

The capital in waiting is the same capital in waiting that created the panic of the first depression. This is all about consolidation of crontrol. They will sit and wait till they can buy up hard assets for pennies on the dollar. So they are the ones who benifit, is it not logicla to assume they had a hand in it?

Brutus must be talking about mutual fund managers and pension fund managers and people like that. As to the small investor, my husband, a financial planner, is telling everyone who will listen to buy stocks of solid companies right now. I don't know what control those folks are consolidating, but it seems like a good time to get them out of the money market and commodities.

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