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Economist weighs in on stock market drubbing

August 4, 2011
Khan Mohabbat

Khan Mohabbat

The U.S. stock market took a beating Thursday, and investors’ jitters have some justification — but perhaps only in the short term, according to Khan Mohabbat, a professor of economics at Northern Illinois University.

“Investors certainly are worried a great deal about where to put their money right now,” Mohabbat says.

Among the key reasons for their concerns:

  • The financial crisis in Greece appears to be spreading to other European countries, including Ireland, Portugal, Spain and Italy.
  • The U.S. economy could enter another recession.
  • Although the U.S. debt-ceiling crisis was resolved earlier this week, the political battle underscored the deep discord within Congress. The inability to get things done ultimately hurts confidence in the U.S. government, which is facing more big issues on the horizon related to the national debt, Medicaid and Social Security.
  • It is feared that the rating of U.S. bonds might come down a notch.

Mohabbat is optimistic, however, when taking the long view.

“In the long run, my personal view is the justification for those jitters becomes somewhat diminished,” he says. “There is no country on earth that could match the overall performance of the U.S. economy. Therefore, our financial markets are far better off than elsewhere.”