Nightmare on Wall Street: Shocking, But Not Surprising

 

7 May 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com.

It’s now approaching 8 am in Singapore, and, as is my unfortunate wont, I still haven’t been to sleep, although the writing is usually over by this time 😉 .

7 May 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com.

 

 

7 May 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com.

It’s now approaching 8 am in Singapore, and, as is my unfortunate wont, I still haven’t been to sleep, although the writing is usually over by this time 😉 .

7 May 2010. By David Caploe PhD, Chief Political Economist, EconomyWatch.com.

It’s now approaching 8 am in Singapore, and, as is my unfortunate wont, I still haven’t been to sleep, although the writing is usually over by this time 😉 .

But yesterday’s events on Wall Street – a more than 3% slump in all the major New York indexes – obviously impose their own dynamic and logic.

Given the situation, though, we’re going to make an effort to keep this one – relatively 😉 – short and sweet, at least for us.

First of all, at this time, no one has the slightest idea of what happened,

as this news article from the New York Times, and this from its Deal Book blog, make abundantly clear.

And it’s probably likely we won’t have any idea “what happened” for a while – if ever.

So while the various investigations – and their associated cover-ups – go on,

let’s not pretend that any of the “causes” pointed to explain why the Dow bottomed so badly at 2:46 p.m., Thursday, May 6. [br]

EXCEPT …

for the fact that – no matter where you look, with, as always, at least so far 😉 , the exception of China –

THERE ARE MAJOR STRUCTURAL PROBLEMS THROUGHOUT THE ENTIRE “ADVANCED” WORLD, ie, the US / Europe / Japan,

none of which show the slightest sign of getting better in the foreseeable future,

whose different dimensions we have consistently explored in both our “Featured Analysis” and “In the News” columns for the past several months.

Until now, some have tried to argue the US economy is improving, pointing to both the stock market “rally”

and what we have constantly referred to – and totally believe are – doctored numbers coming from various branches of the American government.

But after what happened yesterday in New York, and, as I’m watching Bloomberg –

CNBC being too unreliable under any circumstances, given the centrality to its weltanshauung of my college, er, bud Jim Cramer 😉 –

cover the opening of Asian markets, which have already exceeded the 3% drop on Wall Street,

the stock market “rally” argument is going to be awfully hard to take seriously,

even for those who have so clearly wished it to be true.

And with the certain drop in value of at least two major companies involved in the Gulf oil debacle – BP and Halliburton –

there’s good reason to believe the corporate “numbers” are going to get even worse quickly. [br]

And – in the admittedly unlikely event the financial “reform” actually DOES anything, especially about derivatives, existing or otherwise [sorry, St. Warren ;-)] –

we can also expect the completely bubbled / inflated / whatever you want to call it 😉 financial sector to also suffer a severe, and well-deserved, collapse.

Which, of course, brings us back to the sad spectacle of the Obama administration,

a group that, so far at least, has done little to inspire confidence in anyone except its most “tunnel-visioned” supporters,

and much to alienate its base, while utterly failing to convince its opponents, who, indeed, become bolder by the day.

So there’s no reason for anyone to think the US situation is going to improve any time soon,

especially as long as the “rating agencies” retain their strange power over the US and global economy.

And the situation is hardly better in Europe,

where the British election has produced a so-called “hung parliament,”

which seems most likely to result in some variation of a weak minority Conservative government, or some coalition of either the Tories OR Labour with the Liberal Democrats –

one advantage of which would be an apparently much-needed revision of Britain’s “first past the post” electoral system and the establishment of a more “proportional representation” situation.

Whatever the “final” outcome, it seems one hardly well-positioned to take decisive, let alone successful, action to deal with the UK’s OWN impending sovereign debt disaster.

Which, of course, brings us to the STILL-unresolved Greek sovereign debt situation,

NO proposed solution to which appears to either fix Greece’s ever-unravelling political economic mess,

AND, even worse, only seems to be encouraging the deadly combination of speculators and rating agencies making their methodical march across Ireland and the Club Med countries,

ALL of which face real threats to their OWN “credit ratings,” and, hence, the necessity of austerity budgets of the same magnitude that the Greeks apparently confront.

Even the so-called “strong” European economies – basically only Germany – are hardly paragons of strength,

so anyone who expects improvement in Europe – especially with the impending “deflation” deadlock across the continent – is kidding themselves.

And let’s not even pretend there’s any good news coming from Japan,

where we’ve now had two “Lost Decades” since the collapse of THEIR real estate market in 1989.

To top it all off, I just heard Jim Rogers give a, literally, “breathless” phone interview with Bloomberg,

where he sounded downright scared, even though he said at this point, what happened is a “correction,” and not a full-fledged “panic”,

which, however, was exactly how HE sounded, even as he claimed he was “okay,” since he’d been selling short for the last couple of months.

Given all this, we STILL have no idea if May 6 – two days before the birthday of my dear friend Bridget 😉 –

will end up being remembered, as Franklin Roosevelt so memorably put it, “as a day that will live in infamy”, at least in financial history,

but we should have no illusions that, even if the markets do, in some way, recover,

THE REAL ECONOMIC SITUATION THE WORLD CONFRONTS REMAINS, at best, DEEPLY UNCERTAIN, and, at worst, DOWNRIGHT DANGEROUS.

David Caploe PhD

Chief Political Economist

EconomyWatch.com

President / acalaha.com