The Crash: Panic Grips The Globe

A crisis spotlights Washington's failures

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It was, however, anything but an inspiring performance. The President repeatedly stumbled and seemed unsure of just what he wanted to say. Several times he slipped into well-worn denunciations of congressional Democrats before remembering that this time he was supposed to sound conciliatory. In his Saturday radio speech, Reagan once again called on Democrats to "remember that lower taxes mean higher growth," even while acknowledging that "all sides must contribute" to a budget-cutting package. The net impression was that in countenancing discussion of a tax increase he was doing something he felt he must, without any conviction.

The impact of the President's words was hard to gauge. Exchanges in Asia and Europe suffered additional heavy losses Friday, but that might have been more a response to a bad Thursday on Wall Street. Despite a lukewarm reaction in the New York financial community to the President's statements, prices on the Big Board steadied, perhaps from exhaustion. The Dow average eked out a .33 gain to close the week at 1950.76. Two bits of news helped: the Consumer Price Index rose at an annual rate of only 2.1% in September, less than half the 5.8% pace in August; the GNP grew at an annual rate of 3.8%, after adjustment for inflation, in the third quarter, up from 2.5% in the second quarter. Those figures seemed to indicate that the American economy, if not exactly sound in its fundamentals, was at least not deteriorating as drastically as the Black Monday stock-price collapse might have led an unsophisticated observer to believe.

Nonetheless, the week as a whole will go down as the worst in financial * history. The Dow's Black Monday plunge of 22.6% was almost double the record 12.8% fall on Oct. 28, 1929. Despite a spirited rally on Tuesday and Wednesday, the Dow was still down an unprecedented 295.98 points, or 13.2%, for the week. That immediately eclipsed the record 235.48-point decline the market had suffered the previous week. From its peak of 2722 in August to its Friday close, the average has fallen 28.3%, burning up an estimated $870 billion in equity values. Volume for the week was inconceivably greater than ever before, totaling 2.3 billion shares on the Big Board; the four heaviest trading days in New York exchange history all occurred last week. The turnover strained the exchange's computer network to the limit, and the Big Board decided to knock off trading two hours early on Friday and this Monday and Tuesday to allow exhausted brokers time to catch up on their paperwork.

At best, the President may have bought some time for the White House and Congress to come up with a program to convince investors that something worthwhile will be done to bring budget and trade deficits under control. Probably not much time, either. Wildly gyrating markets are better than those that plunge straight down, but they are hard on the nerves of stockholders who have already proved they are ready to jump at the first sign of trouble. The continued drop on the foreign exchanges Friday cannot be brushed off. If the wild week proved anything, it was that in an era when the U.S. is dependent on foreign goods and capital, no exchange is an island. Price breaks overseas can touch off panic in the U.S., which can then hammer prices down further abroad; that, in fact, is roughly what happened Monday and Tuesday.

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