It's Going To Be A Fateful Weekend

by Chris Sturr | October 10, 2008

This posting is from D&S collective member and frequent blogger Larry Peterson. To see more of his posts, click here.

My apologies for the earlier, aborted pre-New York market opening comment: I write some of these posts a bit under pressure, and I pasted material unrelated to the intended post on the site by mistake. My apologies. As I write at nearly 1 pm Eastern Standard time, US markets continue to follow European and British closes downward.

The gist of the matter is this: the co-ordinated Central Bank actions and attempts to shore up banking systems in several countries have failed miserably, and equity markets worlwdwide are adding significant losses to horrific and even record losses from yesterday (and from the last two weeks: the Dow was down some 20% in the last ten days–and that was yesterday; so a significant amount of pension fund money has been wiped away as a consequence in very little time). Meanwhile, potential lenders of increasingly scarce capital are paralyzed with fear, worldwide. Hence: look to governments to do something drastic this weekend, especially with all the mandarins gathered in Washington for the annual meeting of the IMF anyway. And, even then, don’t expect a quick reversal: too much economic damage has been added to what was already there before the run on commercial paper, and there’s still too much inherent uncertainty concering the time and means necessary to begin to sort out the bad investments from the good and get markets to find a floor, and buyers, again.

This is the last post I’ll make before next week (I’m planning a longer piece for the website, not the blog, that I’d like to see appear early next week, which will concern the historic events since the nationalization of Fannie Mae and Freddie Mac). We’ll still be posting newsworthy items from other sources, though, so keep referencing this site during what promises to be an unusual weekend.

2 comments

Comments (2)

  1. Given the massive currency “printing” by the Treasury for the bailouts, how long will it take for the dollar to tank, and how long for hyperinflation to result?

  2. Good question. Unfortunately, nobody knows. The situation is particularly complicated because of the fact that virtually everyone is piling into dollar assets in the so-called “flight to safety” from the financial crisis, and dumping just about everything else. This has maintained the dollar’s value in spite of the huge expansion of the debt obligations the government has taken over in the last few weeks. How sustainable this is, long-term, is anyone’s guess, especially if the crisis continues to whirl out of control at an ever-increasing pace.

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