PJ Media

Markets Crash, Media Hysterical, Democrats Thrilled

“McCain Loses Fox News” blared the headline at the liberal website Think Progress. And that appeared to be the least of the Republican nominee’s worries. From Wall Street to Main Street, Democrats could barely contain their glee over the sudden turn of events that culminated in the crisis in the markets on Monday.

When financial writers ran out of dire adjectives to describe the serious crisis in the markets, Democratic and liberal blogs helped them out by managing to find a few more. After all, business reporters are not generally given to hyperbole, and the adjective is something of a stranger to them. Thankfully, Obama-supporting websites had access to an online thesaurus or two which they were able to comb for exactly the right apocalyptic language that would freeze the blood while getting the point across that John McCain was at fault by reason of his association with George Bush and that it was time to make sure the windows on those Wall Street skyscrapers were suicide-proofed.

New York Times columnist, blogger, and resident hysteric Paul Krugman referred to the day’s 500 point stock market drop as “Black Monday.” The problem with that is that 1) the name has already been taken; and 2) it is hyperbole.

The real “Black Monday” occurred on October 19, 1987, when stocks lost more than 22% of their value. Today’s market “turmoil” (which is as hyperbolic as the New York Times feels like getting) resulted in a loss of 4.4% in the value of the stock market. This is serious for those of us who have invested in mutual funds (I would suggest downing a good, stiff, Glenlivet or perhaps a strawberry martini before checking your portfolio today) but hardly the kind of thing that will result in an economic collapse.

Now before I am accused of trying to minimize the situation, allow me to plead guilty of my own accord. In fact, compared to the way that Democrats have gone overboard in describing what has happened, I am indeed trying to inject a little sanity into the debate. I can only go by what respected, nominally non-partisan analysts are saying. For the most part, there seems to be general agreement that the situation is serious but that the Federal Reserve is on top of the situation. There is some disagreement whether the federal government should be stepping in with both feet, but, as far as the immediate crisis, it is being handled.

The problem is uncertainty — a state of affairs financial markets hate. And that uncertainty is due to the least predictable element in the markets — the human mind. The next few days will tell the tale whether 50 million years of mammalian evolution has produced a rational being using his higher brain functions or a frightened, panicky marmoset scared of his own shadow who relies on the medulla oblongata for smarts.

But Krugman is doing everything he can to exacerbate the situation except telling his readers where to buy the cheapest apples to sell on a street corner. “Worse than it Looks” is the title of one of his more recent posts on the crisis. His column this morning began, “Will the U.S. financial system collapse today, or maybe over the next few days? I don’t think so — but I’m nowhere near certain.” This is a given where Mr. Krugman is concerned because over the last six years, he has predicted an economic downturn no less than nine times.

It isn’t only Krugman who has thrown gasoline onto this fire. He is only the most prominent of the bunch who have scoffed at John McCain’s contention that the economy is “fundamentally strong” albeit we are in serious difficulties at the moment. By the time this common sense statement made its way around the blogosphere (old Wall Street hand Mayor Bloomberg agreed and gave compelling reasons why), liberals had McCain saying there was nothing wrong with the economy, everything was fine.

I suppose a little hyperbole can’t be helped when the situation is unprecedented. But to read some commentary by partisans on the left, one would think the apocalypse is upon us and it’s just a matter of time before Mr. Potter takes over the Building and Loan while we’re all thrown out on the street with nary a farthing to our name.

Alan Greenspan — who says he hasn’t seen anything like what has happened on Wall Street in his lifetime — now puts the chances for a recession at greater than 50-50. That’s hardly a ringing endorsement to start stuffing your mattress full of cash or sell your stocks and bury the money in the backyard. In fact, this bit of common sense from New York Times business writers Ron Lieber, the Your Money columnist, and Tara Siegel Bernard, a personal finance writer for the Times, is good advice in good times and bad:

Q. How will this affect the mutual funds in my 401(k)? I’m beginning to think I should move my money fast!

A. To put it mildly, it’s likely that your mutual funds aren’t having their best day: the Dow Jones industrial average closed down more than 500 points, or about 4.42%. But markets are mercurial beasts, and we don’t know what’s going to happen tomorrow, the day after — or six months from now.

That’s why it’s so important for investors to be diversified across different asset classes and investment types. It’s one of the most important ways investors can produce more consistent results, while helping cushioning against sharp declines. You want to make sure your money is divided across different slices of the stock and bond markets: that means domestic and international, large, mid-sized and small, as well as other alternative asset classes.

It also might be time to review your risk tolerance: if you’re tempted to move your money around on a difficult day, it might be time to rethink your stock allocation (in other words, you might want to lower it).

Also keep in mind that market declines work in your favor: they allow you to buy more stock or mutual funds shares cheaply.

Making hay of economic crisis is part of politics. The situation in 1980 may not have had the jarring impact of what has happened on Wall Street the last 72 hours, but it was, in many ways, much more frightening to ordinary people. High inflation, high unemployment, and high interest rates along with a stagnant economy were eating away at people’s confidence. Reagan and the Republicans were not above fanning the flames of fear and doubt. Nor will Obama and the Democrats hesitate in this case to use a little hyperbole in order to make things seem worse than they are. But you won’t find Obama predicting catastrophe and economic collapse.

Evidently, he is leaving that to his surrogates.