This will be interesting to watch today. Another sharply down day will start to knock investors' knees. Follow me on the flip to discuss the political consequences.
Politically, if the Dow plunges and this results in a recession, which I think is now likely, then this will obviously be devastating for Bush and the Republicans. Comes a recession and Bush will end his term of office with an approval rating in the mid-teens, where it belongs. Additionally, I believe a recession, much more then the war in Iraq, opens the possibility of a complete political realignment.
I think the most important talking point for the Dems to make is that a recession is the unavoidable by-product of Republican policies which (1) starve the middle class and working poor (the groups that lead consumption) of income and (2) incinerate manufacturing, which still provides jobs with good wages. This recession, if it occurs, will not accidental. It is absolutely the inevitable by-product of the Republicans' policies of "soaking" the middle class and working poor.
Within the Democratic Party's race for the presidential nomination, I think a downturn will assist Edwards. He owns the "economic anxiety" issue. While HRC will no doubt point to the Clinton Adminstrations good record on the economy to boost her prospects, the policies used then were pure DLC driven. These policies (free trade and balanced budgets) are completely wrong for today's economy.
Obviously, I am not saying this potential economic downturn is "good news." Economic retrenchments hit those most economically vulnerable the hardest. But I am saying that this result is the inevitable result of Republican economic policies and that they will get the electoral punnishment they deserve.