Just in case the arrival of St. Patrick’s Day doesn’t furnish an adequate reason for you to hang on a nice stiff drink, here’s some more.
Last week while the media were engaged in spinning various silly tales relating to presidential candidates, not to mention the enticingly lurid story of the fall of Eliot Spitzer, the nation’s financial markets were in a barely observed meltdown. Here are just a few snippets that suggest what we’re in for.
Greenspan: Worst Crisis Since World War II
Alan Greenspan offers sobering analysis in the pages of the Financial Times:
The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war. It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities.
The Greenspan article is fascinating, readable, and ends predictably with a strong (and certainly correct) argument against over-regulation as a false panacea. But Greenspan acknowledges that the crisis has been precipitated by irresponsible profit taking on the part of major financial institutions, and the subprime market figures as an obvious example.
Greenspan forgets some obvious points: such as reckless, uncontrolled deficit spending for a period of seven years, followed by the incurrence of more than $2 trillion in unfunded war debt. That would be enough to stop the healthiest economy in its tracks. Now remind me, didn’t Greenspan occupy some sigificant position of fiscal responsibility while all this was afoot?
Is it pure coincidence that Eliot Spitzer falls just as he is masterminding an effort to address lending abuses, as the Bush Administration is feverishly maneuvering to block him in order to protect the misbehaving lenders? Probably. But this will make excellent material for a thriller.
Markets Plummet in Response to Bear Stearns Buy-Out
The Associated Press:
In the first minutes of trading, the Dow Jones industrial average is trading down 182 points at the 11,768 level.
Dollar Continues Its Collapse
The U.S. dollar has fallen below the psychologically significant 100 Yen level, as it continues to fade in currency trading across the board. Reuters:
The dollar tumbled to a 12-1/2 year low against the Japanese yen on Monday and record lows against the euro and the Swiss franc as liquidity-boosting measures launched by the Federal Reserve over the weekend failed to quell worry about the health of the U.S. financial sector.
The dollar reacted to the Fed taking emergency measures to stem the fast-spreading financial crisis, cutting its discount rate by 25 basis points to 3.25 percent on Sunday and opening up discount window lending to major investment banks, a tool not used since the Great Depression.
Global Markets in Free Fall
The New York Times:
The losses on Wall Street follow widespread declines in the European and Asian markets, led by painful losses for financial firms. Shares of the Bank of East Asia, France’s Société Générale, Barclays, and Credit Suisse all declined nearly 10 percent. Hong Kong’s benchmark index lost 5.2 percent and Tokyo’s Nikkei 225 index lost 3.7 percent to close at 11,787.51, after declining as much as 5 percent during the day.
All the major European stock indexes, from London to Paris to Berlin, were down about 2 percent, though they were trimming their losses in afternoon trading. The declines came after the Bank of England, the Fed’s counterpart, offered $10 billion in short-term loans to bolster financial markets and lower lending rates.
But Not to Worry: Bush Says Everything is Fine
Associated Press reporter Ben Feller:
President Bush, trying to calm turmoil in financial markets, said Monday that his administration is “on top of the situation” in dealing with the slumping economy. “One thing is for certain, we’re in challenging times,” the president said after meeting with Treasury Secretary Henry Paulson and other senior economic advisers. “But another thing is for certain: We’ve taken strong, decisive action.”
The president commended the Federal Reserve for its urgent actions over the weekend. He praised Paulson for working with the Fed and showing “the country and the world that the United States is on top of the situation.” Bush spoke on a day of turmoil and plunging prices on global financial markets. Oil prices hit a record in Asian trading, U.S. stock index futures fell sharply and the dollar hit record lows.
The White House moved quickly to raise Bush’s public profile Monday, and he continued to send an upbeat message, even in acknowledging a downturn that keeps roiling the economy and the country’s people as well.
On Sunday Maureen Dowd was busy speculating on just why Bush is so upbeat, and she offers a number of typically Dowdian answers:
Everyone here is flummoxed about why the president is in such a fine mood. The dollar’s crumpling, the recession’s thundering, the Dow’s bungee-jumping and the world’s disapproving, yet George Bush has turned into Gene Kelly, tap dancing and singing in a one-man review called “The Most Happy Fella. . .”
Maybe the president is just putting on a good face to keep up American morale, the way Herbert Hoover did after the crash of ’29, when he continued to dress in a tuxedo for dinner. Or maybe the old Andover cheerleader really believes his own cheers, and that prosperity will turn up any time now, just like the W.M.D. in Iraq.
Or perhaps it’s a Freudian trip. Now that he’s mucked up the world and the country, he can finally stop rebelling against his dad and relax in the certainty that the Bush name will forever be associated with crash-and-burn presidencies. Whatever the explanation, it’s plumb loco.
Certainly we can’t rule out another possibility: better living through chemistry. After all, the capstone to his utterly bizarre visit to New York on Friday was, according to one observer, a death-grip on-stage hug administered to Henry Kissinger.
I’ll take an Irish whiskey. Better make it a double.