Why Wall Street Has the Willies
Decades ago, when I worked for one of America’s richest men, Norton Simon, he told me, “I stay out of the stock market. You could spend every hour trying to figure out what they’re thinking and still be wrong half the time.”
That advice comes to mind as stocks continue to dive in the days after a “conservative victory” in the debt-ceiling fight that should have cheered up markets by avoiding a default, cutting government spending and preserving the heavy hitters’ tax cuts, with more of the same in sight.
The talking heads will have convoluted explanations for crashing stock prices involving double-dip recessions and global fears, but a non-investor with no financial expertise whose interest is anthropological curiosity rather than greed can suggest something simpler.
As much as its denizens rail against regulation and government interference, there is something Wall Street hates and fears even more—-unpredictability—-and Washington’s recent behavior has given them a taste of Tea Party craziness with its Congressional freshman and GOP Presidential candidates saying in effect, “To hell with the economy–we want what we want.”
Nobel Prize economist Paul Krugman says “markets are pricing in terrible economic performance, quite possibly a double dip. And it also says that Washington’s deficit obsession has been utterly, totally wrong-headed.”
6 Responses to “Why Wall Street Has the Willies”
Sorry, no. People understand what debt is, and what happens when you get too much. They say the household is different from a government, but only in the ways that they can default. The idea that interest can build up to the point where you have to borrow more just to pay the interest is the same. People, particularly investors, understand that because they’ve personally experienced it, and have seen companies go through it.
They’re worried because governments around the world are getting into serious trouble. They don’t believe in voodoo spending, where spending is supposed to grow the economy enough to make up for the lost revenue. They’re worried because the same financial idiots who got us here are still in charge.
Krugman may be able to use fancy theories to reassure people that reality doesn’t count, but investors who fool themselves with theories aren’t investors for long.
Remember that Krugman isn’t being an economist these days, but a lib Dem hack — he is pursuing politics, not economics, even if he and his fans may be trying to put an authoritative academic veener on Krugman’s political statements and actions.
If Krugman is so great, let him replace Geithner after 2012.
A number of Northeastern liberal economists have engaged in politics rather than economics. The late Eisner was great about that (defending the debt and deficits, typical liberal stances unless a Republican is in the White House). As I’ve written before, Lester Thurow (who predicted long ago — because he wanted? — that Europe would best the USA and Japan in the global competition) has been awfully quiet these days.
Prof, we’ll need to get into a debt trap before many people will admit there’s a debt problem, and then of course they’ll be the first and the loudest to say, “Why didn’t we act sooner, when it was easier?”
The same BS will be with us when entitlement reform is forced later.
If we’re all still around in 2025 when the entitlement programs melt down, it will be amusing to read how it is all Bush’s fault.
@DLS
They think a “right-sized” stimulus (I’m afraid to ask how big Krugman thinks that would be) would fix the economy. So, no, they’ll be saying it was our fault for not spending more when it was needed.