Bubble, Bubble, Toil and Trouble

Steyn on El Rushbo on the state of the economy:

The Dow hit a ten-year low today, but don't worry, there'll be a new low along in a day or two. This was Rush on Friday:

The investors, the people who are the real poll on the state of the economy are not investing. They are betting on the market continuing to go south. . . . Folks, Obama doesn't have it . . . Biden doesn't have it. Reid doesn't have it, Pelosi doesn't have it, Barney Frank doesn't have it. There is nothing that is going to come along tomorrow and restore the value of your house, replenish your 401(k) and your kids' college fund, take the Dow back to 13 on the way to 15; it isn't there. It could be again, but not with the leadership we have now.

That sounds right. If the United States government got out of the way, things might get worse before they get better. With the government in the way, we have only the certainty of worse. Washington is engaged in the doomed project of attempting to re-inflate a credit bubble. Can't be done. But, in attempting it, they're massively expanding government spending and further distorting the rules of the market in the same ways that worked out so well for American home owners. And, as Iain noted below, the one group of people economic illiterates like Barney Frank don't seem to mind screwing over are the lenders - the investor class.

So why would you invest right now? From the point of view of investors in mortgage-backed securities, the "Hope for Homeowners" plan boils down to a government-mandated unilateral rewrite of the terms of your investment. It's different in degree from, say, investing in a copper mine in Africa and then finding that this week's president-for-life is going to nationalize without compensation. But it's not so different in principle. And, if you're an investor, what you have to ponder is whether the "Hope for Homeowners, Change for Mortgage Lenders" approach might soon spread to other areas of economic activity. Right now, that seems a safe assumption.

But relax, there'll be another economic summit, maybe as soon as Thursday. And in the afternoon breakout session they'll all wear blindfolds and try to pin the tail on the stimulus. ("Aaaaoow!" "Sorry, Nancy.")

Yesterday I noted that I was waiting for the market to bottom out before investing myself. On review, though, I see that some decimal points got omitted. Did I say a DJIA of 4000-4500? I meant to say 4.0-4.5