Anniversary

Today is an anniversary of note. In 1929, five days after the market sold off 13 million shares, Black Tuesday happened and the market sold off another 16 million shares. For those days that was a big selloff. For the last month we've had a significant decline in the financial markets that some are comparing to that time.

I wondered this morning about another post however. On American Thinker the relative market performance of various markets between December 2000 (the last month of Clinton) and now was presented.

The Footsie (UK) has declined during the period by 38%; the DAX (Germany) by 33%; the CAC by 46%; the Swiss by 30%' and the Swedish by 38%. The column suggests that the Europeans have declined in slightly higher amounts because they have slightly less economic freedom. That indeed may be true, or partially true. However, during roughly the same period European corporate tax rates have been cut by significant amounts resulting in an average rate of 26%.

The financial markets are much more integrated than they were in 1929. If the polls are correct, the US is about to enter a period where our administration is proposing to raise tax rates on individuals and corporations (putting us out of conformity with the rest of the developed world) and at the same time has made noises about reversing the multi-decade trend of encouraging free trade. If both of those come true, we might well become the lagging indicator of the developed world. As Milton Friedman and Anna Schwartz taught us the depression did not get caused by one factor but a combination.