Wednesday, November 05, 2008
Stocks Plunge 5% Upon Obama Win
The stock market has given its verdict on the election: a 486 point (5.05%) drop. This is the worse drop since FDR was elected (4.51%). Worse, in fact, as we can see. This tells us that those who know the most about the economy have no confidence in Obama, just as the drop in 1932 said the same thing during the Great Depression. And rightly so, as it turned out, with FDR, whose policies extended the Great Depression, as his predecessor's had. It was in fact the implementation of increased governmental intervention in the economy which perpetuated the depression into the Great Depression, and those interventions were eerily similar to things Obama has promised to do. It is a myth that the free market caused the Great Depression, just as it is a myth that FDR did anything to end it -- WWII is what ended it. Equally, it is a myth that the free market had anything at all to do with the latest meltdown. This economy is facing a recession. If Obama can move quickly to get much of what he wants, he will put this weak economy into a depression. The last thing you want to do is take money out of an economy during an economic slowdown. That has a deflationary effect. Less money in an economy slows the economy down. If you take money out of a recessionary economy, you will cause that economy to enter into a depression. Obama has further talked about implementing trade barriers, which were another cause of the Great Depression -- and of our war with Japan. These are not good signs. I hope Obama isn't able to implement much until after the economy starts to get back on its feet. Unfortunately, Bush's last few months of trying to help the economy have made a rapid recovery unlikely. Remember, though, that Obama supported it, so what he's going to inherit is just as much the Obama economy as the Bush one.