Today, as he makes his sixth State of the Union speech, the president faces a solidly Republican Congress, and he never has to face the electorate again. So we are seeing a stronger and more forceful president than ever before. He is challenging Congress to act and outlining again the principles he ran on in 2008. This is Barack Obama unleashed.
The economy grew at an impressive rate of four percent in the second quarter of this year, according to a government report released on Wednesday. But the stock market promptly tanked. The Dow lost more than 317 points Thursday and another 70 points Friday. What gives? Financial markets like it when the economy grows fast enough to signal that the recovery is continuing -- but not so fast that labor markets might tighten and workers get more bargaining power to get raises. Markets also worry that if the economy grows too fast, the Federal Reserve might pull back from its policy of low interest rates.
On May 6, 2010, the Dow Jones Industrial Average suffered its fastest nosedive ever. What happened? What's clear is that high-frequency trader accelerated the free fall by withdrawing from the market en masse. Four years after they caused the "Flash Crash," those speed demons still rule our financial markets.
We can just make stuff up with aplomb. One day we say the market rises as "investors cheer" good employment numbers; the very next day we attribute the decline to "structural problems" and look forward to a long decline! Were those structural problems not present yesterday when investors were cheering?
It has become more common to measure the success, or health, of the game by things like the revenue generated by the teams. This is not unlike measuring the state of the American economy by looking only at the Dow Jones Index. It may give a good heuristic of the economy, but it misses a lot of important aspects.