#970 Driving Economics

I have to chuckle when I hear some folks talking about the economic crisis as if it started in the last 50 or so days of the new administration. Wall Street is screaming for attention. Wall Street is going down. The president needs to notice Wall Street, they say.
Um, let me see, the same Wall Street that’s lined up with their hands out for a massive bailout? The AIG Wall Street? The Bear Sterns Wall Street? Or maybe just the Citibank Wall Street. By the looks of things, the president had been paying too much attention to Wall Street.
The economy has been driven off a cliff. The folks that drove it over are long since bailed out. The poor schumck in the back seat who inherited this vehicle plunging to doom is trying frantically to find a parachute, or possibly glider wings. As he’s the corpse that will be found in the middle of the carnage at the bottom, he is likely to take the blame.
Already people are snidely saying the stock market has dropped 1500 points since Obama took office. Well yeah. You try arresting the momentum of a 30 trillion ton car in mid-plummet.
So here’s a little historical perspective on the hysterical invective. The stock market went down when Reagan was elected. They’re nervous ninnies who hate change. The stock market hated the New Deal. Not least because it started numerous regulatory agencies after the greedy profiteers plunged the country into depression.
The Dow Theory of the market says that for every sustained bull market the next bear market will take away half to two-thirds of the gains. Every period of irrational exuberance is followed by a period of irrational despair. The stock market in 1980 was sitting comfortably at 1000 points. The fundamentals were in place. Stocks weren’t valued by wildly speculative imaginings and bubble blowing derivatives.
The Dow topped and the bubble popped at 14000. It’s now around 7000. That’s half. Two-thirds will be around 5000. A lot of paper money is burning up.
But here’s an illuminating light at the end of the tunnel fact. During 2008, American companies still turned out a gross national product that was over twice as much as China.
So hang on.
That pain you feel may be some glider wings sprouting.
America, ya gotta love it.