It’s not the downgrade

As you’ve likely heard, it was another exceedingly unpleasant day on Wall Street today, but the AP account included one especially interesting sentence.

Investors worried about the slowing U.S. economy, escalating debt problems threatening Europe and the prospect that fear in the markets would reinforce itself, as it did during the financial crisis in the fall of 2008.

They desperately looked for safe places to put their money and settled on U.S. government debt — even though those were the targets of the downgrade Friday, when S&P removed the United States from its list of the lowest-risk countries. [emphasis added]

The whole point of the Standard & Poor’s downgrade was to cast doubt on U.S. debt, given the political instability caused by unhinged Republicans. And the first trading after the S&P downgrade, anxiety-ridden investors turned to … U.S. debt.

The massive market selloffs, in other words, weren’t the result of the downgrade. If they were, U.S. bonds wouldn’t be considered a safe harbor.

As for the recent downturn, when Wall Street rang the opening bell four weeks ago today, both the Dow Jones Industrial Average and the S&P 500 stood at nearly three-year highs.

And here’s what the Dow has looked like since.

In case anyone’s interested, this shows a loss of about 15% over the course of the last 11 trading days. That … what’s the phrase I’m looking for … not good.

For comparison’s sake, when the 2008 crash began with the fall of Lehman, the Dow lost 22% of its value in over the course of 10 days.

Support Nonprofit Journalism

If you enjoyed this article, consider making a donation to help us produce more like it. The Washington Monthly was founded in 1969 to tell the stories of how government really works—and how to make it work better. Fifty years later, the need for incisive analysis and new, progressive policy ideas is clearer than ever. As a nonprofit, we rely on support from readers like you.

Yes, I’ll make a donation

Steve Benen

Steve Benen is a producer at MSNBC's The Rachel Maddow Show. He was the principal contributor to the Washington Monthly's Political Animal blog from August 2008 until January 2012.