Today's Financial Markets & Wesbury's "Internet Time"

Back in June of this year, I wrote this post concerning an excellent editorial by Brian Wesbury in the Wall Street Journal. Wesbury's focus was that one current Presidential candidate's call for 'change' is, actually disingenuous, given the real economic change all around us.

However, I wanted to highlight something Wesbury noted at the end of his piece,

"Americans have had it so good, for so long, that they seem to have forgotten what government's heavy hand does to living standards and economic growth. But the same technological innovation that is causing all this dislocation and anxiety has also created an information network that is as near to real-time as the world has ever experienced.

Decades ago the feedback mechanism was slow. The unintended consequences of the New Deal took too long to show up in the economy. As a result, by the time the pain was publicized, the connection to misguided government policy could not be made. Today, in the midst of Internet Time, this is no longer a problem. So, despite protestations from staff at the White House, most people understand that food riots in foreign lands and higher prices at U.S. grocery stores are linked to ethanol subsidies in the U.S., which have sent shock waves through the global system.

This is the good news. Policy mistakes will be ferreted out very quickly. As a result, any politician who attempts to change things will be blamed for the unintended consequences right away.

Both Mr. McCain and Mr. Obama view the world from a legislative perspective. Like the populists before them, they seem to believe that government can fix problems in the economy. They seem to believe that what the world needs is a change in the way government attacks problems and fixes the anxiety of voters. This command-and-control approach, however, forces a misallocation of resources. And in Internet Time this will become visible in almost real-time, creating real political pain for the new president."

My own observation regarding Wesbury's contentions was to concisely restate his several points as,

"Thus, Wesbury notes that because of recent rapid change, originally economic-based, in information technology, boneheaded governmental changes will be quickly penalized in the next election cycle, rather than, as in the last century, 30-40 years later."

I thought of this as I watched S&PIndex futures go to limit-down before the market open this morning.

It looks like global understanding of economic repercussions of the recent financial market crises has morphed to 'internet time,' as well. Financial equity markets are now digesting and reacting to economic news in hours, rather than months, as they may have in decades past.

So, as steep and swift as the evaporation of value in the equity markets has been in the past month, it's quite possible that any resulting snap-back, once bad news abates, will be similarly faster and further upward than what has been historically experienced.

I suspect that Wesbury's observation about internet time is influencing how quickly global perceptions of various interdependencies among economic players affect the value of debt and equity.

We haven't seen this sort of speed and volume of reaction in prior financial market crises or the now-probably onset of a recession.

Right now, we're seeing the more-sudden plunge into financial market and economic gloom. Could it be that the ensuing emergence into the light will be just as unexpected and fast?

I suspect so.