A Stock Market Thing

By Bryan Riley

“Black Monday,” October 19, 1987, was the biggest one-day drop in U.S. stock market history. Pressed for fast and decisive federal action, President Reagan responded: "This is purely a stock market thing."

Reaction from the media was quick and hostile:

The New York Times: "With the fire alarm wailing on Wall Street and the country anxious for leadership, it gets an astonishing rerun of Herbert Hoover. When will Mr. Reagan start fighting the fire?"

Anthony Lewis in the New York Times: "The noise you heard was not just the crash of the market. It was the crumbling of public support for Ronald Reagan. The age of Reagan is over."

Tom Wicker in the New York Times: "When he was cutting taxes, boosting the military budget, firing the air controllers, proclaiming Government as the nation's basic problem, he seemed to know just where he was going and how to get there. Nearly two terms and many traumas later, Mr. Reagan prescribes no new direction, just more of the same - which, many Americans seem to fear, is what brought us to Black Monday in the first place."

Walter Issacson in Time Magazine: "What crashed was more than just the market. It was the Reagan Illusion. As he shouted befuddled Hooverisms over the roar of his helicopter last week or doddered precariously through his press conference, Reagan appeared embarrassingly irrelevant to a reality that he could scarcely comprehend."

Roger Altman in the New York Times: "President Reagan must do more, not least because the Presidency carries special responsibility in times of national nervousness. No modern leader understood this better and dealt more effectively with crises of public confidence than Mr. Reagan's professed political hero, Franklin D. Roosevelt. Instead of continuing the silence and inaction that has characterized Mr. Reagan since the onset of the financial crisis, he should borrow a leaf from his mentor."

In response to Reagan’s widely ridiculed “silence and inaction”, the Dow Jones Industrial Average steadily increased. One year later, the Dow was approaching its pre-crash level. Five years later, it was up 40 percent. Ten years later, it was up 250 percent. Twenty years later, it was up 500 percent. At this early stage of the game, the results of Reagan's inaction compare quite favorably to the results of President Obama’s activist economic policies.