In an interview with CNBC’s John Harwood on Wednesday, President Obama said that the stock market should show more concern than it has in recent days because “I think this time is different.”
He went on to say that “when a faction is willing, potentially, to default on US government obligations, we are in trouble.”
The real trouble is that Obama is suggesting that Republicans are willing to do that, which is simply not the case.
Neither a government shutdown nor a refusal to raise the debt limit would cause the country to miss a principal or interest payment on federal debt unless the Obama administration specifically chose to do so.
(For more on why investors should not be losing sleep over the debt limit, this article by Brian Wesbury and Bob Stein is informative.)
Most importantly, however, is the shocking rhetoric of an American president trying to jawbone down the stock market, which is to say to cost tens of millions of Americans (and foreigners) some part of their savings and pensions, in order to score a cheap political point.
The next day (Thursday) the Dow Jones Industrial average fell 136 points and the S&P fell 15 points. A loss of just over 1 percent is hardly a crash, yet represents roughly $160 billion in losses to owners of shares in publicly-traded American companies.
One cannot demonstrate that Thursday’s results were entirely due to the president, but rarely has the world seen a pied piper of misery like the man who lives in the White House today.