patrick.net

It would be interesting to see that article updated - it is six years old and ends in 2004. I think, though, that there are too many outside variables beyond the influence of any political party. Policy decisions and results don't happen immediately. Besides, there is no controlling variable with respect to who "owns" congress (specifically the house) as the house is the source legislation. A short list of things that were more or less out of the presidents control and/or is debatable as to how the "other side" would have fared:

WWI
Market crash of '29
WWII
OPEC/Oil crisis of '70s
Disco (this was bad for EVERYTHING - can't we pretend this never existed?)
Cold War
DotCom bust
9/11

On top of all of this, the parties have changed. There used to be liberal republicans and conservative democrats - but alas no more.

Good points.

Obama came in after a business cycle crash. The only way to go was up.

People started selling massively when it became clear that Obama was going to be president.

So by the time he ACTUALLY became president, all the 'oh shit Obama going to be bad for business' was priced in and in fact people over-reacted since he really hasn't done that much.

I bet that sort of behavior happened in the past too.

I am not posting this to defend Obama, just curious about the long term trend since 1901.

ChrisLA says

Obama came in after a business cycle crash. The only way to go was up.

Ptipking222 says

People started selling massively when it became clear that Obama was going to be president.

What the hell does Obama have to do with this article? It was written in 2005 and the data only goes through 2004. If you have some updates figures/statistics, perhaps your insights might be worthwhile but I haven't seen any.

I think it's interesting that many conservatives were trying to rehabilitate Hoover's reputation prior to this depression. Those who wanted to castigate him pointed to his policies as too interventionist and really "liberal" and claim that they set the foundation for the New Deal, which they despise.

I suspect, like Jimmy Carter, and the weird partisan rewrite of history on display here, the victors can tell the story any way they want. See? The Market crashed IN ANTICIPATION of Obama winning!

I've heard Reaganites claim that Reagan's lousy economy was the fault of Carter, who had lousy policies. So, Reagan had to take a few years to reverse and undo the damage and for his own policies to take effect. But if that were so, wouldn't Carter's economy have been the result of the Republican policies that came before him? (And Obviously Obama's are a result of Bush the lesser?)

The Republicans had an advantage though---Democrats hadn't been re-elected since FDR. The formula worked until Clinton won his 2nd term, and is now (rightly or wrongly) fondly remembered as having a spectacular economy. He undid the mythology that the Republican house of cards was built on.

Also, I believe the mantra that "WWII" got us out of the depression, is really just a way to deny FDR credit for the recovery. WWII was really nothing but massive Government/deficit spending, right?

With the exception that we don't improve the standard of living, have better commerce through transportation, bridges or whatnot, nor do we get cures for diseases--in other words, it does not make society demonstrably better, but increases employment and the building of weaponry (which in some cases also created employment for dismantling or burying those same weapons!)

Couldn't one argue that without the "war", we could have just as easily had half the soldiers dig holes and the other half fill holes to achieve the same economic/employment benefit?

CL says

Couldn’t one argue that without the “war”, we could have just as easily had half the soldiers dig holes and the other half fill holes to achieve the same economic/employment benefit?

if we had done that we'd just have buffer ex-soldiers.

What WW2 actually did was create a lot of wealth opportunities -- management experience, job skills, scientific, technological, and mechanical advances in a vast array of sciences.

It also broken open the world for increased global trade outside the existing currency blocs, which was good for us and our very strong dollar. For the first 20 years we could afford the strong dollar as the rest of the industrialized world had literally been bombed to smithereens.

Ptipking222 says

People started selling massively when it became clear that Obama was going to be president.

Graph: Household Sector: Liabilites: Household Credit Market Debt Outstanding (CMDEBT)

American in Japan says

I am not posting this to defend Obama, just curious about the long term trend since 1901.

Its how politics work. A Republican party stays in power until a business cycle crashes (under capitalism those are periodic due to capitalism), in voter anger opposing party comes in and stock market goes up because new party is coming in at a time when the nation will be growing again.

Has nothing to do with Democrats or Obama, only voter anger and misunderstanding of business cycles.

ChrisLA says

a business cycle crashes (under capitalism those are periodic due to capitalism)

That's awfully vague.

Back towards the end of the Greenspan era it was thought we had a post-recessionary economy, in that computerization and globalization would reduce inventory mismatches, and that is largely true -- the business of business is a lot more rigorous and measured now compared to the 1920s-1970s.

In this chart -- unemployment rate is blue and Fed Funds rate is red:

http://research.stlouisfed.org/fred2/graph/?g=sW

you can see there's something else going on besides "the business cycle". I'm not up on my Austrian Economics as much as I should be but I think they talk about a "credit cycle", and this chart clearly shows that.

Look at that unemployment rate in 1970 -- the economy was on fire! Inflation was also out of control, since due to labor shortage workers had more bargaining power (it also helped that we drafting into military slavery 400,000 or so men a year!).

Notice the red line in the late 1960s -- the Fed said "Party's Over", jacked rates, and prompted the recession.

Same pattern in 1974 and 1979 -- the red rate jack precedes the blue unemployment hit.

The 1980s, though, we're a bit different. We'd slaughtered the dollar in the Plaza Accords, oil was in global supply glut and essentially free, real estate was going crazy as the baby boom fully hit their 30s and 40s (the last baby boomer turned 30 in 1991), oh, also, government was deficit spending like it was going out of style.

So Greenspan raised rates in the late 1980s and we had the 1990 recession in response.

Greenspan tapped the brakes in 2000 to kill inflation as we neared full employment again and we got the Tech Recession in response.

But the most recent recession, that's too weird for words. This isn't a business cycle thing, it's something much more fundamental -- all the fake prosperity that was funded by suicide debt was taken away in 2008:

Household Sector: Liabilites: Household Credit Market Debt Outstanding (CMDEBT)

Thanks to outsourcing, offshoring, and poor investments, we're kinda just screwed now. We're flushing $1T/yr of borrowed money away on war and we still have a $4T housing bubble overvaluation to deal with:

http://research.stlouisfed.org/fred2/series/REABSHNO

I can see that chart go to $15T quite easily -- that's where we should be if the 1990s growth were extrapolated linearly, and not the hyperbolic ride we got instead.

CL says

Also, I believe the mantra that “WWII” got us out of the depression, is really just a way to deny FDR credit for the recovery. WWII was really nothing but massive Government/deficit spending, right?

First, economists in general are mixed as to whether FDR's policies helped or hurt recovery from the depression. (Yes, I acknowledge that to the majority of posters in this forum, all those economists who argue that it hurt should be ignored for various reasons and therefore by default all economists agree it helped....)

Second, WWII also destroyed a huge portion of the industrialized world's production capacity, with a particularly notable exception. The U.S. had a distinct competitive advantage from that standpoint alone, regardless of whether FDR's policies helped or hurt.

[Deleted post re. business cycles. Already answered by Troy]

I'm not contradicting myself. You just as usual take my point to extreme.

I'm all for free markets, but where fraud is regulated to social contract. One shouldn't have the right to screw the entire nation just because they can pull it off. Law is there to protect innocent people from being wronged, thats where regulation comes in. It should be used for good, not to stifle the competition and pad bureaucratic salaries.

The government must fulfill the role of a referee in a football game. They should not try to determine the outcome, i.e. pick winners and losers, but a game without a referee will descend into a battle of gladiators and lose any semblance of a football game. The requirement of this is: the referee must know at LEAST about the rules of the game as the players or the coaches.
In the case of the US SEC, it appears the referees were clueless.
RE: Credit Default Swaps. They should not have been allowed to be traded, since the essence of insurance is having "insurable interest".
For example, I cannot buy the life insurance policy on someone else's spouse, because I do not lose anything if they die, they do not support me. Now, a wife does depend on her husband for financial reasons and thus insuring his life is legal.
The life insurance industry and regulators understand this, and therefore it is not legal for me to buy a life insurance on someone if I do not have an "insurable interest" with them. A fiance is considered OK but not a total stranger.
If they had a Credit Default Swap situation with life insurance, we would see people trading life insurance policies in hospital parking lots, everyone gambling on how likely it is that Mr. X or Mrs. Y would die of their medical condition.
Those who buy insurance on bonds defaulting should ONLY be those who have an "insurable interest", those who own those bonds.
The selling of the Credit Default Swaps is simply gambling that the bonds will default and I win because I bought the CDS.
When I learned about these "instruments" I was shocked that the SEC was so full of fools that they never even knew how risky and impossible to manage they were, and never even understood all of these derivatives.
As far as Democrat presidents and the stock market, from 1929 until I think 54 was not such a great time to be in stocks and Democrats were in office.

I wonder who was left who had money to buy stocks in 1933?
Buying an insurance contract where you have no insurable interest is gambling, not insuring against loss.
Since it is gambling, there are many states where it would be illegal, and in states where gambling IS legal, only certain forms of gambling are 1. approved 2. regulated heavily.
The fact that the SEC did not understand what trading Credit Default Swaps was gambling doesn't surprise me at all.
I cannot legally buy a life insurance policy on someone with whom I have no insurable interest.
My answer to the lunacy of the gamblers in banks and the fools in wall street would have been the same before 2006, since I know some of these guys and they have little idea what happens outside Manhattan or the little corridor between DC and Boston.
None probably ever visited Salinas, Modesto, Stockton, etc. to see who was actually getting those huge mortgages and how unlikely it was they could ever pay them. Since I personally knew illegal aliens ( I have lived in Mexico ) who cleaned houses and bought houses they could never pay for, it was predictable. But, I did not know much about Credit Default Swaps until later.
I instinctively thought the CDS should have not been legal to trade just since I knew about the insurable interest concept.

I generally am against gambling. So is our society. But, as long as those who lose actually lose, who cares?
I would absolutely HAVE advocated regulating CDS, because I would have thought to myself "the bond owner can use insurance, a third party does not."
But the actual answer to it all is that gambling per se should not have been allowed by BANKS. This is the problem, since banks have an essential function in the USA, like PG&E, they should not have been allowed to gamble.
There is a difference between an equity option and a CDS. The CDS is an insurance on a derivative, which has multiplied its risk compared to the deriviate.
The true analogy to a CDS would be a CDS based ON an equity option. Imagine that?
The whole thing is OK as long as they had not changed Glass-Steagall, so that banks could gamble again. The problem was that those who should have been wiped out were made whole by the U.S. Taxpayer, since banks are essential.
To clarify my thinking on CDS again: When I heard about them, I thought *trading them* was *wrong*, and I had no idea whether or not they were dangerous. My first thought was "why were they allowed to trade them?"

Let people buy gold, buy houses, buy silver, buy anything. If they lose, LET them lose. This is fine with everyone.
CDS per se are not bad, trading them is a bad idea in my opinion. I always thought they were crazy because they were removed from the person who had the insurable interest.
Why is insurance regulated? Why is margin regulated? Why is gambling regulated?
You and I should be allowed to gamble some of our money. But, when you decided to gamble against Apple, were there not limits and rules which determined how large a bet you could make? Could you "bet" your entire net worth on the strength of your conviction that Apple will take a dive? A meteorite may hit Cupertino, or a texting soccer mom may cream Jobs on 85, you never know.
Should there not be rules regarding who may buy a hedge fund?
A mutual fund can be bought by anyone, with no cash down if you set up automatic contribution from a bank account. Can you do that with ANY security? No.

I cannot legally buy a life insurance policy on someone with whom I have no insurable interest.
Funny you should mention that. From Saturday's WSJ : Life Partners Holdings Inc., which has sold billions of dollars worth of shares in strangers' life insurance policies to retail investors, said it received a notice from the Securities and Exchange Commission that the agency's staff planned to recommend a civil action against the company and its two top officers. The action may be related to a previous WSJ article that questioned the accuracy of the company's past life expectancy prognostications.

Well the discussion getting into how much has changed since the 1930s. Still, I am curious for the reason why the market has done better under democratic presidents...

>You can change the tax rates to anything you want but it isn’t going to make a difference as long as there are tax shelters and other “perks” to the wealthiest people.

When people say this does this mean (1) they agree that some wealth redistribution is needed (to bring back equality of opportunity) but it's just that the tax rates won't bring it about.

or

(2) It is OK to continue on this route until a "Monopoly" like end is reached (often followed by a revolution).

American in Japan says

When people say this does this mean (1) they agree that some wealth redistribution is needed (to bruing back equaliy of opportunity) but it’s just that the tax rates won’t bring it about.

or

(2) It is OK to continue on this route until a “Monopoly” like end is reached (often followed by a revolution).

Can't speak for everyone - but I'm in the #1 camp though I'm not sure I would characterize it as "wealth redistribution" - more like paying in an equitable percentage. So, it is my assertion that fiddling with the rate doesn't amount to much if the underlying rules (deductions and different tax characteristics of "income") don't change.

In other words, what the hell does it matter if the rate goes to 90% if I can call my "income" a dividend or capital gain and keep paying the cheaper rate.

Beyond that, influence peddling by/to special interest creates "you win and you lose" scenarios within the tax code. Taxes (in my opinion) should be designed to generate needed revenue to operate the government - not to engineer winners and losers based on who people know or how much money is pumped into a politicians pocket or their voters.

EightBall says

Beyond that, influence peddling by/to special interest creates “you win and you lose” scenarios within the tax code. Taxes (in my opinion) should be designed to generate needed revenue to operate the government - not to engineer winners and losers based on who people know or how much money is pumped into a politicians pocket or their voters.

Very well said.