Irrational melancholy

The so-called Great Recession was led, arguably, by the collapse of a highly overheated housing market which in turn was egged on by low interest rates and lightly-regulated banking practices. The tumbling economy was reflected by the stock markets; the Dow Jones Industrial Average fell from its October 2007 peak of around 14,000 points to almost 6,500 points at its nadir in March 2009.

There is good reason to believe that had the Fed controlled the post-2001 low-interest-rate orgy sooner, or if the orgy had not happened in the first place, housing markets and the economy by consequence would have stayed stabler.

Yet, stock markets tumbled worldwide when China increased the benchmark lending rates last week to stabilize growth and let the steaming economy cool off a bit. Well, hello, free markets! There are many who castigate the stock market for the woes it brings upon itself and the world via its short-term thinking; they couldn't be more right in this case.