HONG KONG -- Sometimes it is difficult to fathom the mind of Mr. Market. After the Congress Party won the Indian election, the stock market plunged. After U.S. President George W. Bush's re-election was confirmed, markets everywhere were almost dancing with joy, seemingly oblivious to $50-a-barrel oil prices, the bloody mess in Iraq, the threats from al-Qaeda, America's jobless recovery and its yawning deficits.
TV's talking heads were jubilant, declaring that a victory for tax cuts that would boost economic growth and send Wall Street and other markets soaring. Perhaps it was the hallucinatory effect of the election slogans that had many voters believing that God and American guns could keep gays and terrorists at bay while restoring peace, harmony and prosperity to the world.
The reality is that Bush will be forced to make hard choices, and the American people will have to face pain for their profligacy. For the rest of the world, U.S. difficulties will bring hardships.