Thursday, April 2, 2009

Stocks Soar, But What Does It Mean?

The Wall Street Journal reports:

At about 2:10 p.m., the Dow Jones Industrial Average was higher by 252 points, or 3.3%, after climbing over the 8000 mark for the first time since Feb. 10. Over the last four weeks, the Dow has tacked on 21%, its best four-week rally when all four weeks have finished in positive territory since May 1933.

The S&P 500-stock index climbed 3.4%.

This is, of course, great news! But what does it mean? It all goes back to Japan.

In this post, I made the argument that the Fed is doing too little and therefore runs the risk of (softening, yes, but) prolonging the recession. As I noted, Japan has been widely criticized for unnecessarily extending their '90s recession by taking a series of half-measures, and we appear to be mimicking Japan's mistakes.

I fear that the public will look at our recent economic stabilization and reject additional rescue measures, resulting in the half-measures employed by Japan. We should remember that one month of improvement doesn't a recovery make.

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