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Sunday 22 February 2009

One of the more unapologetically idiotic notions being advanced by certain conservative commentators is the idea that the poor performance of the stock markets represents a negative reaction to Barack Obama’s stimulus package. For one thing, the trading markets aren’t gauges of overall economic health. They are gauges of future anticipated profits for the large corporations that make up their components. In the long run, certainly, these two things should be correlated. But they needn’t be perfectly so: an oil price shock, for instance, is possibly good for the profitability of Exxon, while being damaging to the economy at large. Likewise, the announcement of a plan to take over and turnaround Citigroup, perhaps a necessary evil for economic recovery, would certainly not be good for Citigroup’s shareholders, who would probably get wiped out in the process. Nate Silver

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