THE OBAMA MARKET BUBBLE FINALLY BURSTS - A LITTLE
Beginning in March of 2009 when bank stocks rebounded and started the greatest but phoniest Fed manipulated bull market in U.S. history (engineered by wizard Ben Bernanke) we had publicly traded companies borrowing money at near zero interest rates and massively buying their own stocks (aka buybacks). This created what is called a "false wealth effect;" though the Main Street economy was still in recession with productivity abysmally low stock values, with little real earnings, were pushed up astronomically by the Fed to record highs. And this practice continued throughout the Obama years with the Dow growing from record highs to record highs up to 120%, with the gap between the soaring artificially roaring market and Obama's low growth, heavily regulated, anti-business, flat to failing economy becoming so great that the Queen Mary could sail through it.
Donald Trump inherited a colossal market bubble from Obama that having grown more than 40% since his election is now undergoing a predictable sell off correction where inflated market values are coming down closer to reality. How quickly this will happen is anyone's guess - but happen it will.
But let's be clear about what this correction is not. It's not, as some fear (or hope), Lehman Brothers and 2008 all over again. What crashed the market then was the housing and credit collapse that was rooted in the Clinton administration's reckless "homes-for-everyone" program to artificially boost the home ownership rate. This was when Clinton massively used subprime lending to put millions of low-income folks into homes they couldn't afford (see and see). That created a housing and credit bubble that George Bush inherited from Clinton and tried but failed on 17 occasions to correct (see).
Fortunately, President Trump has reversed Obama's growth killing redistribution, regulatory, red tape and anti-business policies and hugely cut individual and corporate taxes to supercharge the economy and unleash its great productive potential. As the stock market falls the economy will rise and the two will eventually achieve equilibrium and balance. Market values will be realistic reflecting actual productivity and GDP growth, and not be absurdly inflated like they are now with no relation to economic reality.
REAGAN'S BLACK MONDAY
But today's Monday crash is not even remotely close to the crash of Monday October 19, 1987 when Reagan was in power and the economy was going gangbusters. Called "Black Monday" the market that day fell 508 points dropping from 2246 to 1738 and lost a whopping 22.61% of value (see); this made it the greatest one day percentage sell off and drop in Dow Jones' history. In today's crash, however, the market lost only 4.6% of its value, making it the 33rd worst drop in history.
The good news is that the stock market (called the "Wall Street economy") is not the Main Street economy; and the economy in 1987 was growing so robustly and creating tons of good paying jobs that the major correction of Black Monday changed nothing for working class Americans; they weren't hurt by the crash and continued to prosper. Indeed, Reagan's so-called "trickle down" economics caused a virtual waterfall for the working man that in 1988 swept George H. W. Bush into office in a 40 state landslide election.
The same is true for Donald Trump; whatever the market does in correcting itself from the bubble of the Obama era and his year in office it won't adversely effect the Reagan-like pro-growth policies Trump put in place. As the Trump strong economy builds momentum market crashes like we had today might make big scary headlines (with MSM ignorantly blaming it on Trump) but the Trump Effect won't be stopped.
In 1982 the deteriorating stagflationary economy Reagan inherited from Carter turned into the worst recession since the Great Depression, up until that time.
But when Reagan's economic policies kicked in it triggered the greatest, strongest, most powerful recovery since the Great Depression. A high growth recovery where a grateful and prospering middle class reelected Reagan in a 49 state sweep; and then elected Bush in a 40 stater sweep.
A mediocre economy would be Obama's low growth, bad jobs, flat to failing Keynesian fiasco which was politically devastating to the Democrat Party, and sparked two populist middle class revolts: Sanders on the Left and Trump on the Right.
BTW, the short mild recession under Bush 41 was due to the Gulf War and soaring oil prices. Before Bush left office the Hi Tech Revolution was taking off - the economic driver of the Clinton 90s.
OMB DIRECTOR MULVANEY USES MY TERM “MAGANOMICS” AS THE ADMINISTRATION’S UNIFYING THEME FOR RESTORING THE HEALTH AND GREATNESS OF THE US ECONOMY