Why the Market Crashed

Stock markets are imploding all over the world.  Asian market values are dropping like a rock.  The New York Times said:

Markets in Tokyo, Hong Kong and Sydney on Tuesday extended the losses they suffered Monday as fears of a recession roiled markets worldwide.

The Dow-Jones average was down 400 points at opening today.  Voters are telling pollsters that they're more worried about the economy than about Iraq.

It wasn't so long ago that pundits were telling everyone that the war in Iraq would be the #1 concern for the 2008 election.  The war has dropped off the radar, however, because the war is going so much better than before Mr. Bush ignored Congress, surged the troops, and appointed General Petraeus.  Reuters wrote:

The study [of news coverage of the war] by the Pew Research Center's Project for Excellence in Journalism said the volume of coverage from Iraq fell from 8 percent of all news stories in the first six months of 2007 to 5 percent between June and October due mainly to a decline in news accounts of daily attacks. [emphasis added]

Pew doesn't want to say so, but mainstream newspapers don't like to write good news about the Bush Administration.  Since they can't say bad things about Iraq, they don't say anything about Iraq.  News volume is down by nearly half.

Given that newspapers have to write about something, why write about the economy?  Because the economy really is in trouble.  Everybody's wondering why.  The economy has been growing quite nicely since at least 2003.  Oil prices have been high for a long time; the economy handled that.  Oil prices may come down a bit now that Iraq's oil fields are coming back on line.Why would the economy tank now, specifically?

The Rich Bail Out

The economy is tanking because rich people are selling out and running for cover.  They're selling off stocks and buying gold -- gold prices are setting new records. Although gold is used in many industrial processes such as making computers, gold production just about balances gold use each year.  The only reason why gold prices would shoot up is that people are buying it as an investment.

Gold doesn't pay any interest so it's normally a bad investment unless you think that the economy is going down.  If you own a lot of stocks and bonds but you think that the entire economy is going to go down, you sell your stocks and bonds, but what do you buy then?  If stocks and bonds are going down, the only safe place to put your money is gold.  It won't pay interest, but it holds value.

The economy is going down hard because rich people think the economy is going to get a lot worse and they're bailing out.  But why do they think the economy is going down?  Because they think the Democrats will take the Presidency.  Mr. Bush has vetoed the worst of what the Democrats wanted to do, but if there's a Democrat in the White House, their stuff will pass.  What will it be?

What Would Democrats Do?

It doesn't take a crystal ball to see what the Democrats would do if they took the Presidency: all we have to do is look at what they tried to do after they got a majority in the House and Senate.  Pelosi came to power promising to clean up Congress, but as we've reported, theft (both legal and illegal) went on.  Democrats love trial lawyers, so they tried to pass laws which would make it easier to sue businesses.  Democrats won't fix the education system, they're a wholly-owned subsidiary of the teacher's unions.

They're trying to pass a law which would let unions take over a workplace if a majority of employees signed cards asking for an election.  Unions have to win a secret ballot for now, but if they can take over by putting pressure on people to sign cards out in the open where everybody knows who signed and who didn't, they'll get into more businesses.  Rich people know what that means for efficiency, competitiveness, and return on investment.

Democrats are talking about the biggest tax increase in American history.  If you were rich and listened to what the Democrats say, wouldn't you try to move your money to a place where they couldn't steal it from you?

But we ordinary citizens should also be worried about the Democrats taking over.  Let's compare the two parties in terms of how they might run things.  If you look closely at the candidates, it's hard to take the Democrats seriously.

Democrats talk about UFOs along with glitter and dried macaroni used in a candidate's kindergarten project; Republicans compare tax proposals and share ideas how to deal with the War on Terror.  As the International Herald Tribune reported, "Issues take back seat as Obama and Clinton tangle."  Serious voters are more interested in issues than in personalities, but the candidates aren't.

The Candidates

Now let's consider the candidates.

Rudy Giuliani was a two-term mayor of New York City, turning a budget deficit into a surplus and taming what was thought to be an ungovernable mess.  He held the third-highest rank in the Reagan Justice Department, obtaining over 4,000 convictions.

Mitt Romney's father was governor of Michigan.  Mitt himself founded a venture capital firm that created thousands of jobs and billions of dollars in value.  He saved the Salt Lake City Olympics when the bureaucracy messed it up, and, as Governor of Massachusetts, he tried a worthy experiment with universal health insurance.  He didn't just advocate health insurance, he did something about it - which, by the simple fact that it has not yet abjectly failed, makes it the most successful government intervention in healthcare in most of our lifetimes.  Getting anything done is hard, the California health care proposal is in trouble in the courts.

John McCain's legislative and military career spans five decades, with half that time having been spent in the Congress.  He's seen war up close and personal, as he memorably reminded us with his explanation of why he couldn't attend Woodstock.  He knows what it's like to have your friends come home in body bags, but he also knows that war is sometimes necessary in our imperfect world.

Fred Thompson, perhaps the least serious of the major Republican candidates, has more experience in the U.S. Senate than any of the leading Democratic candidates.

Barack Obama is nearly halfway through his first term in the Senate, having previously served as an Illinois state legislator.  He's done nothing but run for President since he got to Washington.  He's a wonderful orator, he's taught Constitutional law and claims respect for the Constitution.  He's also a very likable guy, but he's advocated invading Pakistan and fumbled the question on driver's licenses for illegal aliens.  Invade Pakistan?  How can we give him the nuclear football?

Hillary Clinton boasts the longest record of the potential Democratic nominees with just over one term in the Senate.  Senator Clinton can't claim a single significant legislative accomplishment; she's known for requesting $1 million for a museum to look into the past and commemorate Woodstock.  She claims experience from having lived in the White House but unfortunately, her husband's library won't release the papers so she can't show what a wonderful help she was.  Her husband won't let her brag about her many accomplishments; how sad.

John Edwards validates the American dream that anyone can run for Congress -- once.  With $1,200 haircuts and a 28,000-square-foot home, purchased with the proceeds of preposterous lawsuits exploiting sick children, how can he understand the real world in which you and I live?  At least the trial lawyers will no longer be unemployed if he becomes President.

Where's the Beef?

Try to think like a rich person who wants to stay rich.  Forget what you believe about public policy.  Forget taxes, investment, immigration, Iraq, free trade and crime.  Forget the issues and think only of the candidates' track records and experience.  We elect a President to make decisions for us as things come up.  Is there any serious question of today or any big question that might come up in the future that you'd rather trust to someone with the Democrats' experience instead of the Republicans?

Rich people are voting with their feet: they're grabbing their wallets and running away.  They aren't doing this because things are bad, they're doing it because they know a) the Democrats are favored to take over the White House and b) laws the Democrats have already tried to pass will badly hurt the economy.  Rich people may not understand the Confucian cycle in detail, but they know that what the Democrats want to do won't work.

We may be jealous of rich people, but somebody has to own the factories and businesses where we work.  Its hard to start a business.  I ought to know, I've failed over and over.  We need people whose vision and capital provide economic growth and jobs.  And all they want, really, is for government to leave them alone.

Rich people sense a Democratic administration; they're selling out and running for the lifeboats.  That's why the market is going down.