Another Black Monday? What really happened today on Wall Street Robert Reich Aug 5 Friends, First, a bit of personal history. Two weeks before October 19, 1987, I warned publicly that “in two weeks, the stock market will lose 20 percent of its value.” Then, on October 19, 1987, the S&P 500 had the biggest one-day fall in its history — down 20 percent. I was deluged with letters and phone calls (no emails then) from people who wanted to sign up for my “investment letter.” I told them, regretfully, that I didn’t have an investment letter. What I didn’t tell them was that I had been making the same prediction — that in two weeks the stock market would lose 20 percent of its value — for three years. Everyone who makes economic predictions will one day be proven correct if they stick to their guns. Which brings us to what happened today. “Stock markets are crashing, jobs numbers are terrible, we are heading to World War III, and we have two of the most incompetent ‘leaders’ in history,” Trump bloviated this morning. Rubbish. The United States is not facing imminent recession. The American economy is still growing. There is no reason to panic. Trump and his lackeys would like nothing more than economic panic because nothing else they’ve thrown at Kamala Harris is working. A few of you expressed concern in your substack comments today that billionaire supporters of Trump might be trying to bring on a crash, perhaps by suddenly withdrawing their investments from the stock and bond markets. But they cannot do that without suffering massive losses. And where would they put their assets in the meantime? In truth, Fed chair Jerome Powell — who Trump first appointed in 2018 — probably should have begun cutting interest rates at the Fed’s last meeting rather than waiting until September (when the Fed will likely cut interest rates by half a percentage point). The Fed’s current 5.3 percent rate is too high. The Fed’s goal of 2 percent inflation is too low. Lower-income people have been especially harmed by high interest rates — which have heightened credit-card fees, car loans, mortgages, and rents. Last Friday’s slower-than-usual jobs report for July provides evidence. The world is also justifiably worried about the tinderbox of the Middle East — and Netanyahu’s insistence on holding onto power by escalating warfare. History provides some reason to relax. October 19, 1987 proved to be a short-term panic. The Fed poured money into the banks. Brokers didn’t default. The market made back all its losses within two years. The economy was fine. In any event, although Trump doesn’t seem to realize it, the stock market is not the real economy. The real economy is comprised of average working people whose spending determines whether and how fast businesses will hire more workers. Employment slowed in July because the paychecks of average working people aren’t going far enough. The reason paychecks aren’t going far enough is that interest rates are too high (as I said) and also because corporations still have too much power to keep prices high. The Biden administration’s tough antitrust enforcement needs to be even tougher.