My FOX Index measures the gap between the current market and a healthy close for the three major indexes: 12,000 for the Dow, 1,300 for the S&P 500, and 2,500 for the NASDAQ, or a total of 15,800.
November 5, just after the Republicans’ midterm election victory, the Index reached its highest point (-551) since the 2008 financial crash. It’s now even higher, at -311 (see chart) with the Dow Wednesday hitting 11,559, the S&P 500 at 1,259, and the NASDAQ at 2,671, the highest the NASDAQ’s been since late 2007. The FOX Index has now passed its previous pre-crash high of -336, reached on August 7, 2008 (I created the Index in July 2008). Stocks are up because Republicans should begin bringing the federal budget under control next year, and because the President and Congress have reached agreement not to raise taxes January 1.
The economy, however, continues marked by high unemployment, and Mark J. Perry and Robert Dell think they know why our housing and finance-based Great Recession has been so severe. Writing in the American Enterprise Institute’s American, Perry and Dell explain how our banking crisis should be “understood more fundamentally as a government failure than as a market or business failure.” Greedy top executives at the government's Fannie Mae and Freddy Mac, backed by friends in Congress, employed government-guaranteed credit to generate a sub-prime based housing bubble that private banks would never have undertaken on their own.