The stock market took a bit of a beating today.

Bloomberg
U.S. stocks plunged, wiping out about $600 billion in market value and erasing all of 2007’s gains, after a selloff in China spread and sparked the biggest rout in four years. Treasuries had the biggest jump since December 2004.

The Dow Jones Industrial Average fell as much as 546 points, the most since the first trading day after the Sept. 11, 2001, terrorist attacks in New York and Washington. All but two companies in the Standard & Poor’s 500 Index declined.

Alan Greenspan, the man who never saw prosperity that he liked, made some comments:

Bloomberg
On Monday, Greenspan said, “It is possible we can get a recession in the latter months of 2007.” Although Greenspan also went on to say that most forecasters are not making that judgment, his remark nonetheless roiled financial markets.

The Chinese stock market dropped, and may drop for a second day.

Bloomberg
The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, plunged 8.8 percent, the steepest drop since Feb. 18, 1997. China’s Shanghai and Shenzhen 300 Index slumped 9.2 percent from a record high. Markets open at 9:30 a.m. in Shanghai and Shenzhen.

Stocks fell after the State Council, China’s highest ruling body, approved a special task force to clamp down on illegal share offerings and other banned activities in the market.

Investors were concerned the Chinese government would impose further austerity measures as the National People’s Congress, China’s legislature, meets next week.

The market may have been overdue for a correction, but today’s activities were more along the lines of your mother’s old question “If Timmy jumped off a bridge, would you jump, too?” The two major factors cited for the drop amount to nothing but hysteria on the part of investors.

Greenspan, the man who killed the Clinton boom, has been predicting an economic downturn from the Bush boom for some time. Fortunately he is no longer in charge of interest rates and cannot force them abnormally high as he did at the end of the Clinton boom. As I saw a commentator say, Alan need to go work on his golf game.

As for the Chinese stock market, anyone who believes that China has even a semblance of capitalism is welcome to buy a bridge I have for sale in Brooklyn. China remains a centrally planned economy. At times, some limited freedom to experiment is allowed, but the reins are always pulled tight if things get too free.

The mandarins in Peking cannot let the economy become too free. It would mean that wealth and power would devolve from Peking, and the Peacock Throne would not be the center of the universe. It sounds like a bad Sci-Fi movie but it is true. If you sell stocks based on the actions of a stock market in a Marxist economy, you deserve what you get.

This is just hysteria. There are no sound business reasons for this reaction.