The markets in Asia
Markets in Tokyo, Hong Kong and Sydney all fell farther in late trading Tuesday than they had all day on Monday. The Hong Kong market plunged another 8 percent by late afternoon after tumbling 5.49 percent on Monday. In Tokyo, the Nikkei dropped 5 percent, hitting a low not seen since September 2005 and facing its worst two-day drop in 17 years on concern global growth is faltering.
and Europe
London’s FTSE 100 index was down 5.5 per cent to 5,578.20 in mid-morning trading, while in Paris the CAC 40 fell by 6.8 per cent to 4,744.45.
The value of Frankfurt’s DAX index fell by more than 7.2 per cent at one point during trading. […]
The FTSE 100 has now lost over 13 per cent of its value in 2008.
have been in free fall for the last two days on fears of a US recession/market collapse, begging the question, what will the US markets do when the opening bells sound this morning?
US stock futures are pointing to a slump on Wall Street as investors return to a market after a three-holiday during which overseas bourses posted some of their biggest one-day point drops since the terrorist events of 9/11, due to rising fears of a US recession.
According to spread bettors IG Index, the Dow Jones Industrial Average is expected to open down 504 points at 11,595. Separately, S&P 500 futures were down 57.20 points at 1,268.10, while Nasdaq 100 futures fell 77.50 points to 1,772.
Oddly enough, even gold futures are down, as investors start taking profits in order to cover their margin calls for their stock losses. We are finally seeing the result of a cascading liquidity crisis brought on by the bursting of the US real estate bubble, and the use of mortgages backed securities (i.e., securitization) which ironically was done to limit bank risk, but has instead led to the use of riskier loans and the creation of a bubble mentality among real estate professionals and mortgage underwriters alike. And all bubbles eventually burst.
The reasons for the worldwide market collapse are obvious. Despite claims to the contrary, much of the world’s economy is still tied to what happens in the United States. Thanks to Republican misrule of the economy, and the abolition of many of the regulations put in place by Democrats after the Great Depression that once insured that our financial institutions were protected from the worst excesses of mismanagement, consolidation and unsound business practices, we now find ourselves, for the second time in two decades with a massive financial crisis, only this time it isn’t limited to one small sector of that industry, the Savings and Loan as it was in the 1980s. Thanks to consolidation of banking and other financial institutions begun during the Reagan era, and continued by the next three Presidents, Bush I, Clinton and Bush II, we now have the perfect financial storm brewing across markets from Hong Kong to Frankfurt to New York.
FUTURE HISTORIANS are likely to look back on the final year of the Bush administration as a moment not unlike 1930, when government dithered while a financial crisis deepened. At every stage of this unfolding crisis, the official response has been too little and too late.
I’m not predicting another Great Depression. Happily, the people who kept insisting that private business could regulate itself did not repeal the entire New Deal. We still have deposit insurance, Social Security, (reduced) bank regulation, the Securities and Exchange Commission, and a Federal Reserve given much stronger powers than in the 1930s.
And we still have a government capable of serious anti-recession spending – if it so chooses. But as the credit crisis deepens, this particular government is still infatuated with free-market fables now thoroughly discredited by events. So we must wait another 13 months before a new government can begin digging out of a needlessly deep hole.
America now faces an economic perfect storm: a weakened financial system, diminished consumer purchasing power, a swooning dollar, and rising inflation. […]
. . . The eventual recovery will require a repudiation of free-market economics, as bold as the New Deal. But like so much else about the Bush legacy, recovery will be far more agonizing than it had to be.
When all the bloodletting in the financial markets is over, will you still have anything left in your savings, your IRAs and 401k plans? Will the plunging dollar ever regain its value? Will prices soar into the stratosphere? Are we edging toward a financial collapse the likes of which we have not seen since the Great Depression? Who knows, but it would be wise to expect the worst.
As for today, I’d be selling the markets short if I had any money to do so. Unfortunately, like most of you, I don’t. We are the pawns who will suffer the most from the blind ideological excesses of the “free market” devotees who have led, controlled and destroyed the base of our nation’s economic power over the last 30 years. I’m sure all of them will land on their feet with nice buyout packages or think tank fellowships, instead of suffering with the rest of us for the mistakes they created. But who ever said life was fair. right?
I’m afraid to look. Honestly. But we’ll see in a few.
If a world wide sell off is what it takes to wake this blind public up then BRING IT ON! Your post is right on target StevenD. We are at the point of no return in this insanity and the people MUST begin to see exactly what the gop has done to this country.
Now, don’t tell anyone that the dems are just as guilty.Bullshit. When our govt is ruled by fiat, then only those in direct control are the guilty ones!
BRING IT ON!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
What the GOP has done to this country? Convinced me and my wife to stay in the money market and be satisfied if we can beat inflation. Only the already wealthy, the “have-mores,” have made out under Bush economic policy.
Excellant diary and analysis.
I bought some gold coins (not enough) back when the price was $450 an oz. I also switched most of my 401 k to money market funds. Sadly, with the dollar’s decline even that isn’t the safe investment it used to be. I figure worst comes to worst we can live off the gold for 6 months to a year if we have to. After that …?
Alternatively, you can sell the gold and invest in the equipment needed to move to the Alaskan outback. A friend, living a warm Anchorage home (of course), tells me that moose tastes great and you can catch and smoke enough salmon to last a winter. Don’t forget to buy a few axes and saws. You will need to build a cabin in order to make it.
StevenD- just a guggestion. If you want to buy an actual material that can be used as currency in case you know what hits the fan- then buy Silver, NOT gold.
The ability to convert silver to currency or needed products is easier because of its much lower unit value.
Just a thought!
Having no investments, only some money in the bank, and getting my money from my pension, I sit on the curb and watch. And ponder whether or not Bill Clinton was really the first black President.
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St. LOUIS (ResourceInvestor.com) Oct. 16, 2007 — Tighter global credit conditions following the plummeting U.S. housing market have hampered the U.S. dollar. But it is not hard to see why the twin deficits, the current account and fiscal deficits, could push the U.S. dollar lower still. The U.S. current account deficit reached $850-$875 billion in 2006 while the fiscal deficit hit $395 billion.
According to the World Gold Council, the government of the United States of America holds gold reserves in the amount of 8,133.5 tonnes (262 million ounces).
At current gold prices, this comes to almost $200 billion dollars worth of gold. The U.S. last valued the gold at $42.22 per ounce, so that’s a 1700% return of unrealized gains. But let us delve a bit deeper before we make any conclusions.
European signatories have about 12,600 tonnes and can sell up to 500 tonnes of gold per the Central Bank Gold Agreement of 27 September 2004. According to the Bank of International Settlements, central banks sold 475.75 tonnes in the third year of the agreement ending 26 September 2007, following 395.8 tonnes in the second agreement year.
If the money is used to pay down some debt, which should be on everyone’s mind at this point, it would really only scratch the surface of the twin deficits. Not to mention a war that has cost $750 billion thus far. The priority should be a better fiscal policy and not a quick fix. So like a rare coin, in this case the reserves may be worth more as store of wealth.
The drawback, however, would be the ‘credit worthiness’ that is lost. The U.S. economy functions on debt financed from abroad. If the government were to sell its gold reserves, the U.S. may lose the ability to function properly as an economy. Perhaps a middle ground might be the best option here, with partial sales.
1,500,000,000,000 U.S. dollars
"But I will not let myself be reduced to silence."I’ve decided to see this as it is without the promise of a happy ending down the road. Denialism is not my forte and I’ve been assuming something like this would happen for a long time. The tough part is that all the personal responsibility one undertakes won’t end up being enough to offset what Bush’s policies will do to undermine us.
These Rep candidiates want to talk about National Security? Well, take a look at the NYSE & the world markets of our allies today and then let’s talk about just how secure we are.
james kunstler had a scathing essay yesterday on the pending arrival of the chicago schools’ shock doctrine, crisis capitalism, as a friend described it:
this one’s gonna hurt, and BushCo™ hasn’t a clue how to resolve it. so much for the MBA presidency, eh.
the classic chimpy story line: a reverse-midas…every thing the man has ever touched turns to shit.
lTMF’sA
Since the hedge funds & managers are carefully screened off from sunlight, they certainly will be the elephant in the room that we won’t fully realize is there until he decides to relieve himself.
Of course the WH response to all this will continue to be losing more emails.