Filed under: Merrill Lynch (MER), Politics, Housing

If you can’t pay back the bank, the bank takes your house or your car. If a stock you own loses its value, there’s no collateral you can go after to cushion your loss. This is why Bush’s debt recession will be far far worse than Clinton’s equity one.

The stock market in the last year of George Bush’s term is following a pattern that reminds me of the last year of Bill Clinton’s. The Clinton market tumble — where the NASDAQ fell in March 2000, rose through September 2000, and then began a straight down plunge through January 2001 — preceded a brief recession in 2001. But I think that the Bush recession — following Dow and broader market quakes in March 2007, August 2007, and the 14% decline since the October peak — will be much much worse.

The reason? Clinton’s recession was driven largely by a collapse in equity prices, while Bush’s will be driven by an implosion in the value of debt. Before focusing on what Bush’s recession might look like, it’s worth remembering that Clinton’s was driven by the collapse of the NASDAQ as the dot-com bubble burst. It also involved debt — $1 trillion worth of borrowing by fiber optic network builders like Global Crossing that went bankrupt when they couldn’t pay their debts as their customers, the dot-coms, went belly up.

Continue reading Why the Bush debt-recession will topple Clinton’s equity-recession

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This entry was posted on Friday, January 18th, 2008 at 3:06 pm and is filed under Stocks Money News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.