I could have filled his head with all kinds of pseudo-scientific mumbo-jumbo, explaining that stock markets can be volatile and the slightest event can trigger either a fall or a rise in stock prices. Instead, I told him what I believe to be the truth:
I'm no economic genius. I've only taken Econ 101 in college. But I understand enough of it to know that what Obama has planned will do more harm than good to the economy.
The investors have little or no confidence in President Obama's economic policies and they're getting out while they can with what cash they can before the Democrats can find yet another way to take it away from them.
With every new round of spending Obama proposes, the Dow Jones heads for the cellar. That should tell him and his advisors something: the people that understand our economy don't trust him because he doesn't know what he's doing. Or worse, he knows exactly what he's doing and doesn't care that he's singlehandedly tanking the economy.
...after five weeks in office, it's become clear that Mr. Obama's policies are slowing, if not stopping, what would otherwise be the normal process of economic recovery. From punishing business to squandering scarce national public resources, Team Obama is creating more uncertainty and less confidence -- and thus a longer period of recession or subpar growth.
So what has happened in the last two months? The economy has received no great new outside shock. Exchange rates and other prices have been stable, and there are no security crises of note. The reality of a sharp recession has been known and built into stock prices since last year's fourth quarter.
What is new is the unveiling of Mr. Obama's agenda and his approach to governance. Every new President has a finite stock of capital -- financial and political -- to deploy, and amid recession Mr. Obama has more than most. But one negative revelation has been the way he has chosen to spend his scarce resources on income transfers rather than growth promotion. Most of his "stimulus" spending was devoted to social programs, rather than public works, and nearly all of the tax cuts were devoted to income maintenance rather than to improving incentives to work or invest.
A lot of people, particularly Democrat cheerleaders for Obama, are due for a rude awakening when the the effects of the stimulus bill, the proposed budget, and all of the proposed tax changes start to be felt. Any hope we had of a recovery sometime later this year will disappear, dragging this recession out for another year...or two.
So much for economic recovery.