Norris Insights

TW- As you know, I like Floyd Norris' financial writing from the NYT. Below I have picked out some of the highlights from the past week or so from his blog:

TW- Why has this plunge has hurt worse than others?
"But so far in October[this was as of last Friday 10/10]...the S.&P. is down 22 percent. The only other time since the Depression that there was that large a fall within seven days was in 1987...the 1987 crash brought prices down from levels that were not very far from their record highs, set in the previous August. Investors were stunned, but they had not felt badly before prices plunged. At the close Oct. 19[1987], the S.&P., was down just 7.2 percent since the end of the previous year. By the end of December, the index was up 2 percent for the year. There was no recession....This time, we were in a bear market before the October plunge began. Since the peak last Oct. 9...the index is down 42 percent...This year, there was a recession under way for the entire year — I believe — and by the time the crash began there was no doubt that the economy was in decline both in the United States and overseas...Directly after the 1987 crash, the Fed slashed rates and made cash available to the banks. That helped to stem the panic. This year, the Fed had done all that and much more before the crash came. "

TW- No surprise the McBush party is struggling in the polls:
"George Will, writing in The Washington Post today, observed that 'the Obama campaign is benefiting from a mass mailing it is not paying for. Many millions of American households are gingerly opening envelopes containing reports of the third-quarter losses in their 401(k) and other retirement accounts — telling each household its portion of the nearly $2 trillion that Americans’ accounts have recently shed...'

A Canadian lawyer was stunned by the response President Bush received this morning from people in a Washington hotel lobby when he began his speech on the financial crisis. The lawyer was in town for a banking conference being held at the hotel.
'He came on CNN and they started laughing before he said anything...I’ve never seen a president treated like that, not even Jimmy Carter.' "

TW- On why laissez-faire ideology has hit the rocks:
"Mr. Volcker concludes with words that should become the foundation of the next administration’s efforts to come up with a new system:
'There is, and must be, recognition of the essential role that free and competitive financial markets play in a vigorous, innovative economic system. There needs to be understanding, in that context, that financial ups and downs — and financial crises — will be inevitable, even with responsible economic policies and sensible regulation. But never again should so much economic damage be risked by a financial structure so fragile, so overextended, so opaque as that of recent years.' "

TW- On why this crisis has implications far beyond the immediate:
"This may cause long-term damage to the free-market doctrine, particularly in countries where it is not entrenched. Among the worst performers is the Ho Chi Minh index in Vietnam. That is not very important internationally, but Vietnamese who lost savings may suspect the Americans have struck them again, albeit with weapons of a different sort."