American Schizophrenia: Democracy Ascends, the Dow Plunges

Yesterday, an epochal day in American history, 146 years after Lincoln signed the Emancipation proclamation, as Barack Obama was being sworn in as the first African-American president of the United States, a persistent schizophrenia of the American soul was laid bare.

As the president-elect placed his hand on the Lincoln inaugural bible, and hundreds of millions of Americans and many more around the world were struck with hope and wonder, nameless fund managers and anonymous shareholders were calling their brokers and shouting "sell!" As the president gave his campaign cry of "yes we can!" the reality of an exuberant walk up Pennsylvania Avenue to the White House, cynical men and women eyeing their assets with that very greed the new President had condemned in his inaugural speech were whining "no we can't."

As the country rose to heights the most hopeful could scarcely imagine, these cynics were pushing the stock market down to new depths -- more than 300 points down, below 8000. This knee-jerk vote of non-confidence in the economy in the face of the most impressive vote of confidence in democracy the country has ever seen reveals a dangerous schism. It sets how we think as investors against how we act as citizens. It makes Wall Street more important than Constitution Avenue.

President Obama's historical mentor, Abraham Lincoln, famously said a house divided cannot stand. President Obama seems to be a true uniter, but the inner schizophrenia that divides the public citizen in each of us from the private consumer continues to allow our narcissist's pessimism to trump our civic optimism.

If America's investors lift their eyes from their virtual ticker tapes long enough to notice that America is transforming itself, maybe they can give the economy a chance to recover. If not, they will learn that schizophrenia is a form of madness in which demons drive out angels, and they will risk defeating the new President before he can even get started.

Wake up fund-managers, share-holders, bankers, investors and consumers (that's more or less all of us): the words My Country T'is of Thee sung so magnificently by Aretha Franklin apply to you too. To all of us.

Comments

[ideasmatter]

if it is true that the DJ is below the value where it ought to be -- basically because of Wall Street spite -- the this represents a great opportunity for people with common sense. Buy undervalued stocks now! Anyone knows what Warren Buffet is doing?

[MMB]

I just do not know what to think, what to believe and what to do with my savings, my inability to get a job (laid off 2x in 1 year), my ability to retire (I am 55), frankly, my future.

I do not know where to turn.

[Chaimirija]

I still think Wall Street is having a temper tantrum---thye keep holding their breathe til they turn blue---hoping we will give in...I say, call their bluff; this is a poker game

[Aaror]

Actually, a lot of folks on this post are forgetting that RBS reported horrifying losses, which crashed the banking sector stocks, which was most of the losses that day.
There is such a thing as a coincidence people...

[cayuse]

The Stock Market is a LOTTO for trading in issued stock. It is called here by this article and everyone as incorrectly as INVESTMENT. Another WORD twisting reality and fact.

If I purchase a stock on the Stock Exchange it invest NOTHING into the ECONOMY. I am laying my dollars on the CRAP,21, Texas Hold Em TABLE. This is not investing folks, it is GAMBLING. That is as close as it getS to investment. Not one thin dime goes into Corporate or Business. It goes into the pock of the rich investor (gambler) or Corporations (gambler) who plays on the table of the STOCK MARKET.

Yes, if you take your winnings and buy IPO or New Issues of stock, buy a small business, a Yaugt, a car, or stuff cash into a bank. THIS IS INVESTING. With 60% of all corporate profits going to this LOTTO are you all confortable the ECONOMY is in good hands from GAMBLERS. I call this foolish. I do not gamble with my or my families future, I took MATH probability and statistics.

[Beachrunner]

Obama promised to raise capital gains taxes to 58%. He gets sworn in, and the market tanks. No surprise. But the worst decline ever on an inauguration day? Scary.

[cayuse]

Obama is correct. 58% for gambling profit in taxes goes into the economy. When the market goes up the best gamlers will keep on gambling by re-investing their winnings no matter what the tax rate is. Probability will tell you if you keep playing you will break even. Winnings go up and Winning go down. Sound familiar!

[Aaror]

I think you have this wrong, he promised to raise capital gains taxes back to the same rate as the tax on honest work!
That is a 58% increase over the lowered rates brought to us by the Bushies, but it is not 58%, it is just the same rate as I pay for working for a living.

[weatherwaxx]

Obama has just enacted strict rules on lobbying and corporate 'gifts' ... his watchwords are "accountability" and "transparency" ... small wonder that the wall street cannibals are pulling out. Business not as usual, they want to take their toys and go to Dubai.

[cayuse]

I agree, but they did this last year. Hence why the market fell. A year later they told the public what they already new because they lost their job. We are in a recession.

The other truth is that the winnings have been going to China and not America for some time

[Kassandra]

It would help thaw the lending if Bernanke would raise the interest rates a little. What reason do the banks have to lend if they don't get any return?

[pepper47]

The Fed Chairman can raise the prime. that is the rate at which A 1 credit rated banks borrow
cash at, from very large "federal reserve system" banks.
Low prime only increases the profit margin between it and the interest we pay on our cridit cards
Lower prime increase lending because banks make more more.
Call it a sale on money. increasing the prime will incease the cost of money.

[cayuse]

The FED is member banks. Bernanke could have order actions of bank w/o cash?

[jfor]

Err because we the people gave them the money so in turn they can lend it. It is our money that they are not lending not theirs.

[Toonadude]

It WAS ours ... now it theirs.

[cayuse]

0% cost and 30% return on Credit cards is a great return. After creating SWAP and Derivitives bank do not trust each other. Bank do not trust consumers with bad credit either. So is this all that hard to understand by business and common folk?

Start new bank w/o debt temporary or perminant. Let the other oligopoly bank fail or survive on their own. Create jobs and raise wages so credit can imporve.

[Noworries2008]

I found this to be interesting. Hope you might too.



Headlines On This Date 4 Years Ago:

"Republicans spending $42 million on inauguration while troops Die in unarmored Humvees"

"Bush extravagance exceeds any reason during tough economic times"

"Fat cats get their $42 million inauguration party, Ordinary Americans get the shaft"


Headlines Today:

"Historic Obama Inauguration will cost only $120 million"

"Obama Spends $120 million on inauguration; America Needs A Big Party"

"Everyman Obama shows America how to celebrate"

"Citibank executives contribute $8 million to Obama Inauguration"




Nothing like fair & unbiased coverage of the news!!!
Alas -- guess it is the inflation that is to blame.

[endbush]

The Bush price does not include security, and the Obama price does. Until I see the real numbers, I'm not gonna bother listening to refrains of "Obama's cost 3 times as much."

Also, the majority of the nation is HAPPY about Obama because they actually VOTED for him. And ECSTATIC that the idiot has returned to his Texas village. If that's not worth an enormous party for the American people, then nothing is.

[joeythetrollslayer]

I think you've got it wrong. They're all trying to get their money while they can. Maybe they know something here, just how far and how deep the corruption goes...?? Remember: these guys think: greed is good. They can't change. It has been their religion. Get your money, run out of country to South America. They'll migrate like birds flying south.

[cayuse]

Once the billion Chinese start consuming the US will be a very poor investment. If China had their 54,000 roads built you would see the FRUIT of the direction you speak.

Cecil Rhodes saw America as a WILD returned to nature play ground for the RICH vacations.

[edgeways]

This happens all the time: I think you are misusing the word schizophrenia. Do you mean that America suffered a serious psychosis with accompanying visual and/or auditory hallucinations?

Or perhaps you meant manic/depressive (bipolar)? Multiple Personalities Disorder?

If you are going to randomly make medical analogies (especially in your headline), perhaps you should flesh out specifically what you mean by it, or make it actually appropriate to what people assume you mean. Or... just stick to some sports metaphor, that's usually safe.

[onomyeye]

no, the 'schizophrenia' is being used properly here. schizophrenia isn't only a medical diagnosis, it also refers to when something is composed of dual but antagonistic characteristics. this use pre-dates the psychiatric usage of the word. psychiatrists believed that the psychosis was due to some unseen psychological conflict, and used it to name the syndrome.

blame the psychiatric profession for continuing to use such an outdated term.

why so rude?

[cayuse]

Relax, when you speak metaphorically the words are in the hands of the symbolls you express

[breakingpoint]

more and more job losses to come - we are on the verge of a tax payers revolt - they better get with the program quick

[cayuse]

You have the right term TAX. Change the tax code before you throw money. Otherwise the rich get richer faster.

[peterg76]

The stock market goes up and down all the time.

[cayuse]

When you gamble, mathematical probablility identifies this to be TRUE

[rixter1965]

Here's another idea: the Market (literal place) and the market (a series of relationships based on many things) are not universal principles or indicators. Gov. Tim Pawlenty of Minnesota was just on MSNBC using "the market" to explain why Republicans are "in the wilderness." It's tired, Tim.

[cayuse]

The market is a crap shoot.

[Bitsko]

As a slight change of pace, here's Timbuk3 performing The Futures So Bright (I Gotta Wear Shades)

http://www.youtube.com/watch?v=wvIAyxpjEuc