“Wheeeeeee!”, Said the Stock Market
Today was one heck of a ride for the financial markets as the Dow set a record for a one-day increase, nearly doubling the former record. I swear, watching the tote board rise on CNN as I was sitting in a restaurant waiting for dinner to arrive, I thought we’d hit 1000. As it was, we came darned close.
Our financial system still has some real trouble spots and our government needs to be very careful, lest it flood the market with too much cash (triggering a nasty inflation increase) or socialize the market far too much. Right now, it looks like the Treasury Department is leaning heavily toward both and that would be a pair of very bad ideas right now, from where I sit.
I do not like the idea of our government owning any portion of a private bank. As I’ve said before, that puts the government in a position of having to compete with its citizens in the free market. In that battle, the citizens will not win.
My best advice, from a layman’s point of view, is that the government needs to see to itself. Instead of meddling in banks, it needs to clean out the stinking rot of Fannie Mae and Freddie Mac. It needs to repeal the Community Reinvestment Act that got this whole mess started and it needs to look into prosecuting those public officials behind the fraud that plagued the GSEs for a decade. If our government really wants to give the markets some confidence, the best thing it can do is to send a clear message that it will stop meddling in areas where it is woefully ignorant.
For the rest of us, our position is simple. We must not panic. Our financial system is far from dead and though we may see a few rough months, the only thing that can drive us into a depression is our own blind panic. We have to remain calm, be clear and deliberate about what we allow our representatives in Congress to do, and make darned sure that they don’t overreact or grab yet more power for themselves.
Other Posts of Interest:
- Yet More on the Mortgage Mess, Including What Must Happen
- Shooting Craps with the Economy
- How to Handle the Mortgage Mess? Do the Right Thing.
Category: The Economy and Your Money
To your advice, I would add quit paying attention to the sensationalist media. Here is a great example why:
http://gawker.com/5050946/how-magazines-led-inves…
Back in December Fortune magazine named AIG one of the "Best Stocks for 2008."
It seems there have been worse financial panics we've experienced compared to what we are going through now. America came through just fine.