An Obama Market Panic?

Are the markets panicking at the prospect of an Obama presidency and his presciption of more spending and higher taxes? Or are they just panicked?

The New York Post advanced the Obama Panic meme a while back, but I think that the panic is more about the fact that we are heading into a pretty nasty patch of economic weather.

And the markets sense that the politicians really haven’t a clue what to do about it. Let’s be frank. If McCain wins in November he’ll want to lower tax rates. And if Obama wins he’ll want to send out tax rebates. How about something we can agree on: tax rate cuts for corporate taxes? How about a cut from 35 percent to 25 percent?

Just as big as the Obama uncertainty problem is the fact that nothing will get done until the new president and the new Congress take office in January.

Here’s an idea from good old J.P. Morgan in the 1907 Panic. He did triage on the companies asking for a bailout. If he figured that the company would survive anyway he refused to extend credits. If he figured that the company would fail anyway, he refused to extend credits. But if he figured that the company could survive if he gave them a loan then he did.

Do you imagine that the new president and the new Congress could rise to something so practical and sensible?

I have my doubts.