Last week saw people losing over half their portfolio value in one week, and Monday saw the largest absolute increase in the Dow in history, so are happy days here again? The answer is that we will not know until the injection of capital into the financial system is completed. If(and that is a big if) the bailout plan succeeds the velocity of money should increase, which would avoid a depression since a low velocity means money is not being loaned out or used to purchase goods and services.
Even if the bailout succeeds, the political landscape will be changed by the economic realities of the last eight years. The first lesson is that the Republican party cannot claim to be the party of financial responsibility as they have presided over the complete removal of any spending restraint. Secondly, the McCain/Caribou Barbie campaign is in very dire straights with three weeks left in the election. Since early votes are already beginning in some states and will all be starting by next Monday, this last debate is really the final gasp in the campaign. If McCain comes across as badly as he has the last two debates, with stumbling and playing for a tie, prepare for the polls showing Obama up double digits to increase. Is the debate performance going to be too little too late?
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