Investors Walk; Obama Talks

Obama and Geithner

As per the usual during an economic crisis, President Obama entered the homes of average Americans through their TVs this week to tell them about his plans for fiscal recovery. After a major stock sell-off following S&P’s downgrade of the U.S. credit rating, Obama wanted to stop the flood of investors leaving the market.

Average Americans responded by selling even more stocks than they already had:

After the first day of trading following Standard and Poor’s downgrade of the U.S. government’s credit rating, markets around the world tumbled well into the red for the day. In particular, the U.S.-based Dow Jones Industrial average fell over 630 points, losing 5.55% of its value in a single day.

This is the second drop of over 500 points in less than a week, the biggest dip in value in U.S. stocks since the 2008 financial collapse. While stocks recovered on Friday following the latest U.S. jobs report, S&P released its downgrade after the markets closed for the weekend, reducing the government’s AAA rating to AA+. S&P cited the political impasse in Washington, the “rising public debt burden,” and the fact that the debt ceiling deal reached by the President and Congress last week “falls short of the amount that [they] believe is necessary the general government debt burden by the middle of the decade.” (Read the [S&P’s] full report here.) Naturally the economic pains felt by the U.S. and around the world are not purely the result of this downgrade, but the downgrade itself is far from negligible…

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