Jim Manzi on the stock market's free fall:
this is a ferocious bear market, but, so far, it is an almost exact repeat of what happened after the collapse of the .com bubble about 5 years ago. In fact, if we were to repeat that experience, we would see further declines from where we are today:
On the other hand, Manzi writes, you should be concerned about:
the ever-growing TED Spread, as per a prior post. It is now well over 400 basis points, or about 50% above its historical peak at the time of the 1987 stock market crash, and about 10 times its "normal" level. It has continued to rise every week throughout the past month, indicating further worsening of the credit crisis, and rising perceived risk of contagion. We've injected so much debt into the system over the past decade that not only can't we borrow our way out of the consequences of the real estate bubble popping, but we're going to have to start paying off a lot of the existing debt in the face of a poor economy. What Paulson and Bernanke are doing is to make this adjustment only painful instead of catastrophic.
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