Local Economist Analyzes Financial Swoon

One local economist believes Thursday’s stock market crash won’t kill retirement accounts but will curb spending.

Fred Crowley, with the University of Colorado, Colorado Springs, said he was bombarded with questions about what caused Thursday’s financial market crash and what kind of impact it could have in the short term.

Crowley believes the 512-point drop in the Dow Jones Index can be blamed on the federal government’s pledge to reduce spending by more than $2 trillion earlier this week.

“The investment world is a little bit worried about what happens when the government stops spending money, that’s an important component for Gross Domestic Product,” said Crowley.

He said for those close to retiring, this big drop could keep them in the workforce for another year or two but this dip did not wipe out all the gains they’ve seen since 2008.

“They weathered the storm of the 2007 to 2008 downturn and the stock market is still up 70 percent from its lull,” said Crowley.

Still, Crowley said this was a significant hit to our fragile economy and wiped out six months worth of gains in the stock market. It could affect spending in the short term, with consumers reluctant to purchase big ticket items.

“We just lost 10 percent of our income maybe,” said Crowley. “If you think in terms of the value of the stocks lost and that will hurt retail trade, sure.”