The Other McCain

OK, it’s not a complete meltdown, but the release of a jobs report today showing a weak employment picture — temporary Census jobs making up most of the gain — evidently punched a hole in investor hopes of recovery. As of 3:30 p.m., the Dow Jones Industrial Average was below 10,000, more than 300 points down for the day.

On days like this, the TV in my office stays on CNBC and even the usually bullish Jim Cramer was singing the blues. We’ll wait and see whether the market rallies before the close, but I just want to point out that my persistent pessimism was somewhat prophetic this week:

• June 2: Report: Bottom Falls Out of Housing After First-Time Buyer Tax Credit Expires — “The point is that this one-time injection of federal money into the housing market is like ‘Cash for Clunkers’ — essentially buying short-term economic ‘good news’ that won’t last because such artificial intervention does nothing to address the underlying economic fundamentals.”
• June 1: Second Half of the ‘W’? — “For the past two weeks, the Dow has been struggling to stay above the 10,000 level. To close below that level would be to give back everything the market has gained since Feb. 8. . . . What investors must wonder is whether the past month’s declining trend on Wall Street is merely a short-term correction . . . or the onset of the second wave in a W-shaped (‘double dip’) recession.”

Long-term, I have been predicting the failure of Obamanomics since before Obama was inaugurated:

• Jan. 8, 2008: It Won’t Work
• Feb. 9, 2009: It Still Won’t Work
• May 4, 2009: The Fundamentals Still Suck

The failures of Keynesianism were entirely predictable. But being liberal means never learning a lesson. Robert Reich clearly sees the evidence of a double-dip recession, but . . .

So what’s the answer? In the short term, more stimulus . . . .
In the longer term, we need a new New Deal that will bolster America’s floundering middle class. Expand the Earned Income Tax Credit and extend it up through the middle class. Finance that extension through higher marginal income taxes on the wealthy, who have never had it so good.

Great — more stimulus and a new middle-class entitlement. The exact opposite of sound economics.

UPDATE: OK, the market closed with the DJIA down 324 points. More to the point, the Dow is now off 1,274 points (11.4%) since April 26:

Despite obvious signs of continuing weakness in employment and other key indices, Daniel Gross at Newsweek is still pushing the “recovery” hype. Right. And assuming his 401(k) were all in stocks, Gross would have lost 11% in the past five weeks, just like everybody else. His net loss since October 2007 would be 29% and — oh, by the way — the money-losing magazine Newsweek was just put on the auction block by its parent company, Washington Post Co., which has seen its stock decline by 49% since 2005.

UPDATE II: Reuters summarizes the day:

Stocks cascaded to their lowest close since February on Friday after May’s jobs figure slammed investors already reeling from worry over another developing debt crisis, this time in Hungary. . . .
“It was extremely disappointing,” said Robert Froehlich, senior managing director of The Hartford Mutual Funds in Simsbury, Connecticut.
“We know that employment is the lagging indicator, but … we’ve been saying that for a year. There comes a time where we’re really going to have to see that number pick up.”

Right. Employment is a lagging indicator of recovery, but if you’re thinking “recovery” and waiting on employment to pick up, where are you going to be when the recovery fails to materialize? And did somebody mention Hungary?

PRAGUE — Fears that the debt crisis could migrate to central Europe were stirred Friday after a senior Hungarian government official said the previous government had manipulated budget figures and lied about the state of the economy . . .
The official, Peter Szijjarto, a spokesman for Prime Minister Viktor Orban, was quoted by Bloomberg News and other news agencies as saying that the Hungarian economy was in a “very grave situation.” He even raised the specter of a default, saying such speculation “isn’t an exaggeration.”
His comments followed similar warnings on Thursday by Lajos Kosa, a vice president of the governing center-right Fidesz party, and other officials that Hungary was in danger of suffering a Greek-style crisis, with budget deficits — officially 4 percent of gross domestic product in 2009 — possibly reaching 7.5 percent of G.D.P. this year.

The New York Times notes the suspicion that Hungary was trash-talking their economy in order to gain “a stronger negotiating position with the IMF,” which may be the case, but it was a reminder of the general shakiness of the European economy. And the Euro fell to $1.20.

UPDATE III: Guess what actually gained Friday?

Gold priced in euros reached a record. Futures in New York surged to an all-time high of $1,249.70 on May 14, and the metal has outperformed equities, bonds and most commodities this year on escalating demand for a store of value.
Gold may reach $1,700 in the next year, partly on demand from Asian central banks, Michael Lewis, the head of commodities research at Deutsche Bank AG, said today in an interview in Lima.

Stop reading Newsweek. Start listening to Glenn Beck.

UPDATE IV: Welcome Instapundit readers!