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No one can prove that the crash in global equity markets has anything to do with Obama becoming president, but there are reasons to think so.
Obama is seeking to implement virtually overnight a blueprint for an unprecedent expansion of government's size and power, and huge new tax burdens and deficits will be required to fund this. He justifies it all with the unproven and logic-lacking theory that more government spending and intervention can expand the economy. He is rushing to implement a massive shift in the way we use energy by putting in place a politically motivated tax on the cheapest energy available, based on an increasingly smaller "consensus" among scientists that reducing carbon emissions will "save the planet."
In short, Obama is taking monumental risks, not only with his own presidency, but with the future of our country, and ultimately with the well-being of the entire world. He wasn't kidding when he said he was audacious. But it's increasingly looking like his audacity is spinning out of control. In my view, that's what is worrying equity markets all over the world. This is far more serious than the subprime lending and related financial crisis, which is well on its way to getting fixed.
9 comments:
Scott,
Besides cap-and-trade, did you see the other taxes he is imposing on oil companies?
http://blogs.abcnews.com/politicalpunch/2009/02/obamas-budget-a.html
I'm not catching how this jibes with his vow to reduce our dependence on foreign oil.
Scott,
What is the actual day he took the lead?
I've checked online betting exchanges and the Univ. of Illinois' analysis of polling data (http://election08.cs.uiuc.edu/home.html). Obama started to move up in the latter part of September, following a brief period in early September in which Sarah Palin gave a significant boost to McCain's chances. By early October Obama had taken a commanding lead. The stock market's big leg down started Sept. 29th.
What I don't get is that the bush administration and now the Obama administration (and Clinton before that) continue to completely ignore Nuclear Power plant projects. Nuclear power is the only currently known technology that can replace fossil fuels while producing no greenhouse gasses. Wind and solar can't produce enough reliable energy to supplan fossil fuels. It will take at least 7-years to get a new Nuclear Plant online. We need to start now! Think of all the jobs 45 nuclear plant would create. Now that's stimulus.
Scott,
Thanks for the dates. That means that while Bush was still president and while there was still a decent chance that McCain would win, the S&P 500 declined 26% (from the high 10/31/07 to the close on 9/30/08.) Since Obama's ascendency in the polls and ascent into office, it has declined 37%. I think the market has moved from worrying about financial institution balance sheets and their ripple effects to depression over the the outright wealth destroying prospects for almost everyone of Obama's proposals. By my calculations, we now have the largest spread between AAA bond yields and the S&P earnings' yield (using peak earnings) since 1966, surpassing even that of late 1974. The credit markets believe that there is a good chance bond payments will continue to be made, but only the most audaciously hopeful equity buyers think earnings will rebound to pre-recession levels in the foreseeable future.
The silver lining to Obama's proposals may be that they are too much to stomach for all but the most hardcore lefties. David Broder's recent column -- "Obama Rolls the Dice" -- should serve as an unexpected shot across the administration's bow. Broder's innate caution leads him to opine that Obama "is putting at risk the future well-being of the country and the Democratic Party's control of Washington." Of course, Broder lacks the intellectual framework to acutally criticize the real-world effectiveness of Obama's proposals, so the rest of the piece is mostly about the political difficulties they will encounter. But the fact that one of Obama's establishment supporters has been left almost speechless by the potentially ruinous effects of his programs is encouraging.
Scott,
The following article titled 'Atlas Shrugged as Prophecy' by Higgins (2007), is a tribute to the brilliance of Ayn Rand and her understanding of economic and human action principles--principles upon which you base and deliver sound commentary herein--to clearly predict the anti-individual policies that eventually lead to the downward spiral of every society that puts the rights of the collective over the rights of the individual (are you listening Mr. Obama and the like), "just wanting to do a little bit of wealth-redistribution, a little bit of fine-tuning in the name of 'fairness' .... After all, rich businessmen (tax-payers) have enough money, so they’d hardly miss a few extra dollars in taxes."
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The following from the article:
"One of the most startling and controversial insights in Atlas Shrugged was that those who reject the moral principles of rational self-interest and individual liberty were acting—whether they knew it or not—on a death premise, and that the more consistently they adhered to their course, the more deadly the results.
As Atlas opens, we hear James Taggart, a businessman with a “social conscience,” as well as other characters, justifying statist policies in the name of “society” and “the people,” or to help “the little fellow,” “the poor,” and “those who never had an opportunity.”
This of course mirrored the rhetoric of American liberals in the 1950s and ’60s. Men like Adlai Stevenson and Hubert Humphrey said they didn’t want to overthrow the capitalist system. No, they just wanted to do a little bit of wealth-redistribution, a little bit of fine-tuning in the name of “fairness.” After all, rich businessmen have enough money, so they’d hardly miss a few extra dollars in taxes.
Such men might be mistaken; but—a death premise?
By the end of Atlas, Rand shows James Taggart breaking down, confronting his own undisguised hatred of the good:
He was suddenly seeing the motive that had directed all the actions of his life. It was not his incommunicable soul or his love for others or his social duty or any of the fraudulent sounds by which he had maintained his self-esteem: it was the lust to destroy whatever was living, for the sake of whatever was not.
Rand wasn’t saying that all who stumble along with a confused mixture of goals—to help the poor through government, while preserving a measure of free enterprise—would end up this way. But she was saying that this is the logical end of any moral philosophy that rejects man’s life as the standard of value and rejects the lives of individuals as moral ends—whether such rejection is in the name of a social or religious good, or any goal higher than and apart from the individual."
Unfortunately, either Obama never read ‘Atlas Shrugged’ or he read it and rejected the sound principles contained within. My guess is he never read it because he appears to be too intelligent to have rejected such.
The full article at http://www.objectivistcenter.org/ct-1990-Rand_pro.aspx
I would be very surprised if Obama had read Atlas Shrugged. If he did, though, then he didn't understand a bit of it.
Couldn't you instead infer from where you point to on the graph " Obama takes lead in the polls", was also the time when everyone started to realize just how bad the economy was... hence the reason for his lead in the polls. And the market has continued to decline from that point simply because the economic outlook has deteriorated even further.
Mark: you are right of course, and that is why the title of the post has a question mark. I can only infer that the market is falling because of his policies. That's not impossible, but I can't prove it.
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