Remember that assertion that the rejection of the Wall Street Bailout bill cost "taxpayers" 1.2 trillion dollars on Monday alone, when the Dow went down 5000 points (it had already been down 250 points or so that morning, on the assumption the bill was oting to pass)? Remember that the Dow essentially gained back that entire 500 points Tuesday and Wednesday (meaning the 500 point knee jerk/political drop Monday afternoon was total fiction)?
Well, that Wall Street bailout finally passed. What was the result for the week in which the bailout bill passed? Right. Taxpayers (that is, people invested in the market) lost more than 1.2 trillion dollars because of the Wall Street bailout last week (counting from last Friday's pre-bailout close to this Friday's post-bailout close).
You say that is fallacious reasoning? That you can't be that simplistic about the stock market? That there were other reasons for the stock market to go down? That ignores that Wall Street, the mainstream media, politicians, and the entire "establishment" tried to use the fictional "1.2 trillion" drop on Monday as a means of rear mongering: using the stock market drop as extortion and blackmail (not to mention fallacious arguments about how one afternoon's predictable stock market action, reversed the next day, meant anything as to the longer term (even week or month) stock market reaction to political action on the bailout bill)--extortion and blackmail to pressure politiicans, and the rest of us, into passing the bailout. The week's actual results show that the political attempt to use stock market action as a lever to pass the bailout was a lie--an evil (because totally dishonest) lie with no reality behind it. There is actually more reality behind the argument that the Wall Street bailout, and the propaganda used to force its passage, was responsible for costing people more than 1.2 trillion over all of last week.
Yes, there was bad economic and company news last week, that put pressure on the stock market. However, the stock market is already down a long ways. You can argue, except for specific companies forced to face really bad news, that the sell has been overdone. But there was no way to make that case last week. Why not? You know why not. The propaganda used to force passage of the bailout--in operation from the beginning Paulson/Bernanke panic and reaching fever pitch when it appeared the bill might fail, and that the public hated it--was intended to produce fear. The stock market operates more on emotion, and projection into the future, than it does on present news. Last week, and for some time, stock market action has been ruled by fear. All of the propaganda used to get passage of this bailout bill, from the very beginning and getting worse as the public reaction became evident, was to induce the maximum amount of fear in everyone. There was no way to keep that propaganda induced hysteria out of Wall Street, and last week proves that this fear mongering did, indeed, affect Wall Street badly.
Assume the opposite. Assume that Paulson and Bernanke had come out, after the AIG bailout, and reassured everyone our economy is fundamentally sound (which John McCain was ridiculed for saying, although that is exactly what needed to be said), but that certain areas of the economy were in a crisis caused partly by the housing/mortgage/credit crisis, and partly by overdone fear and anxiety. Paulson and Bernanke could have announced a number of measures, including many that were done, without inducing (deliberately) the hysteria they did induce. They could have requested a change of accounting rules. They could have requested limits on short selling They could have requested a raise in FDIC insurance. They could have said the Fed was providing liquidity, and the Federal Government was going to use bout the new powers under the housing bailout bill already going into effect, and the Federal Government's new complete control of Freddie Mac and Fannie Mae to make sure credit is available. So long s they were not trying for this massive Federal bailout, there are surely other measures Paulson and Bernanke could have announced, while saying the FDR line: "All we have to fear is fear itself". That line is often quoted, but its meaning is almost never taken to heart. It is like the words don't mean what they say. Certainly, the people quoting the words generally do not mean them. They are often trying to induce fear, as Bernanke, Paulson, and everyone pushing this Wall Street bailout tried to do. They succeeded.
We will neverknow, because it did not happen the way I suggest it should have happened. Instead, we got the worst of all possible worlds. The stock market went down (as it was bound to, when our "leaders" were talking fear everyday). And we intervened in such a way that we pretty much established the principle that the Federal Government is there to bail us all out of every problem we have, using taxpayer money. In the end, that will probably hurt us more, even, than the specific insanity of this bailout bill, and the propaganda used to induce fear to get it passed.
We can't know, but I assert that the stock market would be at least 2 trillion dollars higher right now, and our financial system in less danger, if Paulson, Bernanke and the rest had handled the problem with calm reassurance rather tan fear--reassurance balanced, of course, with sober analysis of the problems.
Fear is a powerful thing You don't want to deliberately stoke it That is what we have done, and I am sure we will regret it. We already should be regretting it, as the case is strong that the Wall Street bailout is responsible for the massive Wall Street losses last week Even if I am wrong about that, passing the bailout has obviously not helped the stock market. It is unlikely to help us either.
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