To say that it's been an interesting week on Wall Street, would be an understatement. The sell off in equities and the flight to safety isn't exactly news, but the sheer volume of activity yesterday was a phenomena. We typically see institutional investors, hedge fund managers, pension planners and others mitigating losses by loading up on Treasuries as quickly as possible before the portfolios they manage deteriorate further. We've known for a while the credit crunch consumers faced would lead to slow down in economic growth, despite the stimulus package sent out by the Bush administration. And because the US consumer drives 2/3 of our economy, that's exactly what happened. But what's happening now is further cause for concern. The Dow Jones was down well over 5% in one trading day--I don't believe we've seen that since the Great Depression. We've got our government interested in protecting the lives of corporations more than consumers. We've got Fannie and Freddie, the staples of the secondary market for mortgages, lacking sufficient capital to cover losses resulting in a takeover by Paulson and the US Treasury. The only question I have is: what happened to laissez-fair economics? The current administration, the Republican Party and Adam Smith himself said the individual, and thus a corporation itself, will pursue its own gain as if led by an invisible hand. The companies in question took actions that drove their revenues through the roof during the peak of the housing market. And now that the market is contracting, they should deal with it. But we throw this view out the window because what's at risk are companies that have been around for over a 100 years? One could even argue that it's a matter of survival of the fittest and these firms should dissolve or be acquired. As a taxpayer, as a financial consultant and as a progressive democrat, I simply can not support these actions.
Change can't come soon enough.
