Who's to blame for the stock market's decline? (POLL)

As far as the catalyst for the market implosion -- it is clear that Alan Greenspan's tight monetary policy of late 1999 and early 2000 was responsible for pricking the market bubble.

Perhaps, though most Freepers - to my virulent disagreement - like to pin the prick (no Willard pun intended) on the 'Toon Justice Department's lawsuit against Microsoft, mainly because it allowed them to both worship at the Altar of Gates and ream Clinton at the same time (and that it "coincided with the start of the crash", even though the prosecution news didn't break until a good month after the Big Drop had already begun; too many people are unwilling to accept that correlation does not equal causastion, especially when it doesn't even really correlate). In any case, that bubble had to be pricked, and the pricking was inevitable. The date that it finally happened, or the supposed impetus, is almost beside the point.

Excellent thread.

Completely agree that blaming Bush is ludicrous, and anyone with a modicum of savvy about the markets would know this was due, which isn't to let the corporate crooks off the hook.

Having said all that, I'm no fan of Bush, and anyone who resorts to the Clinton-lack-of-moral-tone line of argument hasn't been paying attention.

Bush and Harken were doing an Enron before Clinton ever got the presidential gleam in his eye. So by all means let's make the rational case about the situation in the stock market, but let's not go off the deep end on Clinton, when he was only part of a more deep-seated problem.

Right-why are sellers selling?

The 64 million dollar question.I worked on the foor of a national securities exchange for twenty years.The market is where fear and greed,as well as reason meet.To try to explain why the market does what it does on any given day or in any given month or year calls more for a psychologist than an economist.But consider this.

You've probably heard that the stock market,over the long term,is the best place to put your money.That relies on a return of about 8%!Nothing more.Since we've had,now,years of double-digit returns,negative returns are called for as the market regresses to the mean.For example,if memory serves me correctly,the dow was at about 1000 in summer of 1982.If I take 1.08(8%) to the twentieth power(20 years later),I get 4.66,which implies that the dow should be about 4,660.In 1987,before the "crash,the market was about 2,200.So 1.08 to the 15th power is 3.17,implying a dow of about 6,978.Again my memory does not serve well,but in 1994,the market was about 4000.So,1.08 to the 8th is 1.85,or a dow of 7,400.This return of about 8% to capital is fairly well established.Greenspan's notions of productivity are built into it,and will not supercede it.

You might also note that this number also puts an effective cap on interest rates,i.e.,they may not in any case exceed 8%,as then one cannot borrrow money and invest it in capital production profitably. Any rate of interest above the rate of return on capital is usury,and will result in economic contraction.

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