Monday, September 29, 2008
… doesn’t mean the entire economy is having a bad day. Sure, if you’re holding stock that’s gone down, you’re net worth is lower – but then the market has a long history of coming back.
What it could also mean is that a lot of people were betting on the fact the government was getting ready to spread around some serious money. That didn’t happen today and so lots of people got nervous and assumed that everyone else would get nervous, so they sold to get out ahead of the drop, and then the other people saw the prices falling and said, “I knew it!” and they sold… Hey, it’s a speculative market. What did you expect?
Actually, stock prices are driven by two factors: real changes in the fortunes of our publicly held companies, and speculation. Some of the speculation is about profits and potential growth, but a lot of it, especially in the context of wild ass (pardon me) doomsday language coming out of the Administration, is just pure speculation, plain and not so simple. (Keep in mind that some people on Wall Street and elsewhere in investment banking make as much or more money during downturns than upswings. Even among we ordinary people, who out there on isn’t wondering, “You know, honey, maybe this would be a good time to buy?” …”Don’t be ridiculous. Not until we redo the kitchen.”)
The point is, nothing has happened to the real component of our economy in the last few hours. Prices will go back up, eventually. They always have. This is not the end of our economy as we know it. Not even close. (Citicorp helped out Wachovia today, and they did it all by themselves without government assistance.)
I’d like to personally ask Congress to avoid being distracted by stock prices, whichever way they’re moving, and focus on defining the extent of the current problem and evaluating alternative solutions. To borrow a phrase from James Carville of the Bill Clinton campaign, “It’s about the economy stupid,” which is something much larger, much more powerful, much more deserving of your attention, than the momentary fluctuations of a very, very speculative market.