The Problem with Politicians, and Reid Specifically
The Wall Street Journal opined on Saturday that one of the reasons insurance companies are in trouble right now is because some Senators - such as Democratic leader Harry Reid - talked about how “certain” insurance companies may face trouble, even bankruptcy” when the stock markets were still (reasonably) stable.
“One of the individuals in the caucus today talked about a major insurance company. A major insurance company — one with a name that everyone knows that’s on the verge of going bankrupt. That’s what this is all about,” Reid said.
As the WSJ points out, Reid’s words caused an instant drop in the stock markets; since he did not name the actual company involved, Reid caused investors to simply run away from each and every insurance company out there. This how the stock market works; individuals invest based on expectations. If a Senator talks about how a specific company will face bankruptcy but does not name the company, investors run away from all companies in that sector.
This, in turn, is bad for the stock market as a whole and, yes, for the economy.
Politicians should have learned by now that words matter, especially when it comes to the stock markets. You cannot speak about a specific company, without naming it, and expect investors to stay calm. When you break this basic rule you cause a big run on all companies in the sector, who will suddenly face trouble - even if they did not have any problems one week before.
Senators and other politicians who make such mistakes are simply incompetent. It is amazing that these people actually play a major role in the politics of any country, let alone of the most powerful country on earth. Politicians can make or break stock markets and thus economies by the words they use.
Lets hope they have learned their lesson and take themselves and the stock markets more serious from now on.
