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from barchart.com
The DJIA (Dow Jones Industrial Average) plunged another 242.66 points Tuesday, a week and a day after plunging 416.02 points on March 5th… the subject of BI30’s final entry in the old blog format. At that time, I pointed out how… adjusted for inflation… the Bush economy never came close to surpassing the Clinton peak in January of 2000. In fact… adjusted for inflation… the Bush economy is actually well below the levels seen under President Clinton, achieving A NET NEGATIVE GROWTH for the six years GW Bush has been in office. While stocks gained slightly, the market never recouped its losses from that devastating session just one week ago.

Again this week, bad economic news has shaken Wall Street into yet another sell-off, plunging an additional 242 points to close at 12,075.96… a gain of less than 1,500 points since President Bush took office. By contrast, when Bill Clinton took office, the DOW was at just over 3,400 points. Six years later in 1999… same point in his second term as Bush is now… it closed at a record 9,900 points, braking 10,000 two weeks later. That’s a 280% increase in the DOW in just six years. By contrast, President Bush’s 1,488 point gain (10,587.59 to Tuesday’s 12,075.96) over six years amounts to a paltry 14%… again, NOT adjusted for inflation (which has grown at 17% since 2000).

For years, Bush supporters defended this anemic growth when compared to the “Clinton Super Bull” on the grounds that “the Clinton Market was based on hype… over-exuberance of the ‘dot.com bubble’ and not ‘real growth‘.”

But it was bad economic news over the number of people defaulting on their home mortgage loans that precipitated Tuesday’s crash. This “housing bubble” is the direct result of a string of horrifying emergency interest rate cuts by the Federal Reserve after 9/11, initiated as a way of preventing an already floundering Bush Recession from turning into a full-scale economic disaster. I say “horrifying” because cutting interest rates to almost zero may promote consumer spending on “big-ticket” items like homes and cars, but discourages foreign investment, namely, the obscene multi-billion dollar loans the Bush Administration depends upon so that they may cuts taxes for the wealthiest 5% and still pay for the wars in Iraq and Afghanistan (or anyplace else they set their sights on next), not to mention running the government in general.

So while the “Clinton Super Bull” may have been the byproduct of over-enthusiasm for investing in anything connected to The Internet, the Bush Economy has likewise been fueled by overly-enthusiastic “low interest adjustable rate loans” that lured investors into making huge purchases they could only maintain so long as interest rates remained low. They didn’t. Once interest rates began to rise, many investors found they could no longer afford the monthly payments on those huge purchases resulting in a wave of people defaulting on those loans. Couple that with slower sales on “big ticket” items due to high interest rates, and you have the recipe for a no-growth economy.

Despite what most of us have come to assume, the 1929 Stock Market Crash did not CAUSE The Great Depression. It was merely “the nail in the coffin” of a schizophrenic economy. Just prior to that were The Roaring 20’s (“’23-skidoo” refers to 1923). An over-exuberance in “investing” fueled one get-rich-quick scheme after another. “Become RICH investing in…”, the Stock Market, Real Estate, Big Business… anything with the potential to make you money without actually having to do any real WORK, was a new concept to most Americans heady off the post-industrial boom following World War I.

The CocoanutsThe concept of making money without having to work for it was an exciting new idea at the Dawn of the Industrial Age. It was even the theme of the first Marx Brothers movie, “The Cocoanuts“, just months before the crash.


The market peaked with a record close on September 3, 1929 before plunging 13% just seven weeks later. By comparison, “The Bush Crash of 2007” (from 12,514.98 last January to 12,075.96 yesterday – 439.02 points in eight weeks) at 3.5% doesn’t even approach the severity of 1929, but the parallels are frightening and definitely deserve careful watch over the next few months. Is a possible 800-point “correction” on the way? Don’t say you weren’t warned.

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