On November 10th, the Institute of Election Analysis predicted that a Bush presidency would be a "disaster."
On December 10th, the Institute wrote of a Bush presidency: "The financial implications are going to be horrendous. Foreigners now vote in American elections with their dollars. The markets have been falling since October on the prospect of a Bush presidency. Now that the United States is going through a period of oligarchy and has abandoned democracy (hopefully temporarily) people are going to vote with their pocketbooks. Just as the election of Lincoln precipitated the Civil War, the election of Bush, who abandonned Lincoln, is going to precipitate a recession."
Having clearly voted against Bush and his program, the political and judicial elite decided to use legal technicalities to thwart the will of the electorate. Now, as in all totalitarian countries where the opinion of the voters is ignored, the people are reduced to expressing their opinions by any means at their disposal. In a capitalist country, the markets are always available for political expression. The people are now voting against Bush's program with their feet. Just as Clauswitz wrote that war is politics continued by other means, so Leinsdorf is saying that collapsing stock markets is voting continued by other means. Having had their ballots ignored, the people are still voting against Bush by the only means available, one that can not be vetoed by the Supreme Court, they are voting "no confidence" in the Bush administration by withholding their dollars and refusing to buy stock.
The collapse of consumer confidence is completely rational in the light of the fact that the consumer's opinions about taxes and other things were completely ignored. The declining stock markets is the people's way of continuing to vote against Bush's favor the rich tax scheme. Under Bush's proposal, 43% of federal tax relief will go to the top 1% of the income earners. In other words, in the typical manner of a rich person who has inherited, rather than earned his way in the world, Bush is trying to steal the surplus which was amassed by working people, for himself and his rich friends.
So, when will it be safe to go back into the market? When Washington gets the message of last November's election. The current collapse of the stock markets is the result of a political crisis, not fundamental economics. That is why Fed action has no effect.
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While it is doubtful that the stock markets can recover significantly before the mid-term elections in November 2002, it will probably be possible to determine when the markets have hit the bottom.
Contact: Joshua Leinsdorf to subscribe to the Early Warning E-mails.
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