Friday, October 10, 2008

Some Sane Analysis Of The Current Economic Situation

In light of the worst drop in the history of the New York Stock Exchange, Larry Kudlow offers some history and sage wisdom.
Essentially, Mr. Kudlow explains that these economic downturns happen roughly about every 20 years.
In fact, Mr. Kudlow give a little history lesson that the first treasury secretary, Alexander Hamilton, had to engineer a bank bailout/rescue in 1792. And, Mr Kudlow points out that out of that came a regular money-supply system, a credible government debt system, and a more disciplined banking system.
A lot of this does bring back the 1987 stock market dive. In retrospect, it does not seem all that bad because the stock exchange value was nothing like it is now. The Dow Jones industrial averages were in the 2,000s. On the infamous Black Monday, October 19, 1987, the DJIA dropped 508 points or 22% of value. Even the day that the market lost 778 points, it was only seven percent of value. In other words, because the average is high, the point loss are seemingly huge. But, the percentage is not.
It is not to downplay the obvious terrible numbers. But it is to put it in perspective. And if it is all in perspective, then we as a nation will get through this situation. Like so many situations of this nature, it is a crisis of confidence. Now, more than ever, we need to regain our confidence in the economy.

2 comments:

Anonymous said...

That's what I've been sayin' all along, but people seem to prefer to be in crisis mode 24/7.

Rick Frea said...

neat perspective.