Just to keep everything in perspective, the Dow shed 586 points today. Dropping from 16,457 to 15,871 or 3.56%. On Black Monday – 1986 the Dow dropped from 508 points; from 2,247 to 1,739 or 22.6%.
My recollections from that day and the gathering storm I saw in August 2007.
So what happened today? The “plunge protection” operations were possibly busy. Otherwise, it’s likely that it was nothing more than the numbers on the crash in China being absorbed and run through all the Wall St. computer financial models. You, know those super-duper complex mathematical models behind the world derivatives markets. Not nearly as irrationally exuberant as they were before the 2008 crash, but rational enough?
In the short term, probably.
In the mid and long terms? Nobody knows. A downturn in China impacts Germany more quickly than the US because more of its economy is dependent on exports to China. Can it control contain that impact along with the mess it has facilitated in Greece? How vulnerable are other countries to a downturn in China? If one possessed that massive amount of date, are the computer models sufficiently dynamic to project all the fallout throughout the world?
After years of questions and concerns, it’s beginning to dawn on the west that China’s ghost cities malls, etc. are evidence of poor capital and resource allocation.* Structurally or fundamentally not all that different from Greece’s major investment in the 2004 Olympics. With the exception, and it’s an important one, China didn’t build this currently useless crap with loans from western banksters. Thus, instead of “austerity” to pay the bills, China’s workers and residents will have to wait longer for the good times to trickle down to them.
Still. Not seeing any acknowledgement that China played a role in limiting and containing the 2008 western crashes. And if were honest with ourselves, there haven’t been any needed changes to the financial and economic fundmentals in the US. But cheap gas should keep us dumb and happy for a while longer.
* But are brand spanking new ghost towns any worse than troubled billion dollar fighters?
Not so good in China: Asian stock markets swing wildly as Chinese shares take another battering :
China down 6.4%. Tokyo recovered to parity and Australia’s ASX200 mounted a comeback, rising 1.27%, while South Korea’s Kospi index was up 0.36%. Singapore’s Hang Seng rose 1.3% after a 0.6% fall at the open.
Stock markets surge after China cuts interest rates – live updates
China cuts interest rates. Also reduced reserve requirement which increases liquidity. A little late in the day for the Shanghai Mkt that lost another 7.6% in the day, but Wednesday should be wonderful and Tokyo that shed 4%.
With a one week interruption – The Guardian US markets plunge as Chinese economy fears revive global jitters
Has a Wonderful Wednesday been ordered for tomorrow?
○ IMF 2012 Advice: China needs a smooth handover from investment to domestic consumption as the main source of growth
Sharp blow to inequality between rich and poor … or not
○ $4.5 trillion wiped off global stock markets in four weeks – August 2007
○ $6.3 Trillion Wiped Off Global Markets in 2011
○ At opening, DOW falls more than 1,000 points – August 24, 2015
Rebound Tuesday in Europe sparked by the German DAX +4% and released economic index of industrial optimism and growth in Q2 of German export!
Historically — it’s the terrible Tuesday after a Black Monday that signals a real crash. The late in the day actions by the China Central Bank should calm the western jitters.
While all the western experts are telling China what it needs to do, it’s possible that the Chinese experts are a few steps ahead of the westerners and that the slump in China was planned to let some air out its stock market bubble.