If this is the crisis everyone makes it out to be…
…why are so many politicians running around engaging in partisan politics? Lets go with Ezra Klein’s take on the situation,
And so the Republicans killed this bill. Without their cover, the Democrats couldn’t save it, because politically, they couldn’t take ownership of it.
If this situation is so bad (the Dow Tanking 700 points! OMFG!). How come they are playing partisan games? Could it…maybe not be as bad as they are telling us?
Oh, and while todays drop sounds bad, 770+ points down, there have been worse declines. Anyone recall October 19th 1987? The Dow dropped over 20% on that day compared to the 7% – 8% today? On Black Tuesday October 29, 1929 the stock market fell 12.8%.
As for the limited size of the drop I’m thinking that part of it is that the news of the financial crisis has been with us for about 2 weeks now so its effect has already largely been felt. Sure the money the Fed is pumping in helps, but I’m begining to wonder if a bailout really is all that necessary.
As for the rest of Klein’s post,
The question is what comes next. The Dow has plummeted. It’s lost 700 (Update — now back to 600) points in a single day. It’s the sort of freefall that suggests the markets may well begin to lock, that the continually available credit that oils the economy may dry up, with catastrophic consequences. The pressure from the market collapse could sober some congressmen into voting for the next iteration of the bill after having extracted some quick and cosmetic changes. Few want to be judged, either by their constituents or by history, for crushing the American economy beneath their own political cowardice. Alternatively, House Democrats could construct a new strategy: Rather than looking for bipartisan agreement on a muddled bill, they could take full ownership and seek partisan agreement on aggressive bill. They could move away from the bailout model and towards outright nationalization. Only Pelosi knows if she’s got the votes for that.
Can somebody prescribe a sedative, he appears to have become completely hysterical. The market has not collapsed, the American economy is unlikely to be crushed, and stock market was not in freefall.
See this is where many liberals, and conservatives for that matter, go wrong when looking at these kinds of things. They think that government intervention saved America from the Great Depression. The truth is a bit more…well dirty. Many of the government policies prolonged the depression. The most significant was remaining on the gold standard for so long. Remaining on gold standard had the effect of massively contracting the money supply. Prices were actually declining. On top of that the Fed stopped loaning to banks resulting in many banks failing. Sure the government ran deficits, but that is only because tax revenue couldn’t be raised fast enough to cover all the spending. In fact, in 1933 the top marginal rate was raised from 25% to 63% and personal exemptions were reduced. Another point to consider is the Smoot-Hawley Tariff that further reduced global trade. And while the Fed was contracting the money supply and driving prices lower the federal government was paying farmers not to produce to try and raise prices. What made the Great Depression great was its length and the government often selected policies that would lengthen the economic crisis not shorten it. Fortunately people like Ben Bernanke understand what went wrong during the Great Depression. This is why the Fed is pumping hundreds of billions into the market.