Market Shorting Obama’s “Stimulus”
February 28th, 2009
by
Editor: Scott
An interesting piece from two Economists: Prof. Bittlingmayer, University of Kansas & Prof. Hazlett, George Mason University. For those that don’t understand what “shorting” means check here.
…So the Obama theory - government spending is stimulus. If so, financial markets should feel the love. The U.S. budget is awash in red ink, and $800 billion more of it should easily move the needle on our economic prospects. Indeed it has - in the wrong direction. Financial markets don’t want more government debt or a scramble for “shovel-ready” spending projects. They want the skeletons in the banking sector’s closet exposed and expunged.
The Bush Economy went up in smoke in September-October 2008. The financial meltdown hit Wall Street, devastating bank equities and laying waste to America’s 401-Ks. The Republican ticket, McCain-Palin, was a 50-50 bet on Sept. 15; by Oct. 15 it was a 5-1 long-shot. Voters saw the carnage: the Dow Jones Index lost 17% of its value from Sept. 2 through Nov. 3. In a flash, Americans lost years of toil, and Republicans the election. Decisively.
The election marked a turning point. Investors looked forward to the economic policies crafted by Democrats in Congress and the White House. More pointedly, they wanted decisive, well-crafted action on the banking crisis. Hence the Dow soared 6.5% Nov. 21 on news that Timothy Geithner, the highly-respected head of the New York Federal Reserve Bank, was Obama’s pick for Treasury Secretary.
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