That famous line from the 1992 presidential campaign is what made Bill Clinton the 42nd President of the United States. The line consitutes a more modern and sophisticated version of Nixon's old line that "elections are determined by the price of pork bellies in Chicago". The economy is the foundation of every aspect of our power and identity as a nation - and our ability to continue to exist as one. If the economy is good, most everything else will fall into place. If it isn't - nothing else matters.
Today, as I have for the last few weeks (thanks to the weakness in said economy) I had the opportunity to watch as the Dow Jones plummeted even as Treasury Secretary Paulson was offering his rote assurancees that everything was under control and it would all be fine. I believe that it is worthy of note that the markets tank nearly every time he, or any other government official speaks. Perhaps it's because the very fact that they are speaking about the subject means that it is still a problem which is out of control.
There is an old saying that goes "when your only took is a hammer, pretty soon all your problems start to look like nails". Seeing Paulson, Bernanke, et al speak now is a sad and loud and garish real-world expression of that old proverb. They have cut interest rates and pumped billions of dollars into the oconomy, and each time it has had essentially zero affect. So, the answer - to them - is to cut more and pump more. And they will continue to do so until they can pump no more.
That is because the fundamental problem in the market - mark-to-market valuation - is was, and always shall be a lie. For years Wall Street has been operating under the assumption that any asset's value is determined solely on what one can theoretically sell it for. A good principle, but one with limitations. It only works if the buyers are well informed and make good decisions. There really is such a thing as intrinsic value. Just because some idiot somewhere pays $50,000 for a Toyota Corolla DOES NOT MEAN THAT EVERY OTHER COROLLA IS INSTANTLY WORTH $50,000. And now, sadly, the United States Government is in the position of having to pay (figuratively) $50,000 for a lot of Corollas while simultaneously trying to convince everyone else in the market that every other Corolla is a $50,000 car - and people are not that stupid. Not any more. And sooner or later they are going to hit the wall and lose their abnility to buy any more Corollas. People know that, and no amout of bluster on the part of Hank Paulson, Ben Bernanke, or anyone else is going to change that.
It is sad and frustrating and heartbreaking to watch this happen. To watch a great nation essentialy come unraveled because of the greed and hubris of a handful of elite business and government leaders.