October 9th, 2008
09:54 AM GMT
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LONDON, England - Why do I think there is genuine light at the end of the tunnel?  Because we have at last seen real, genuine policy responses.

Until now governments had done little more than "jawbone" the markets or spend money with increased liquidity.  More of the same, you might say.  But the U.S. bail-out plan, the UK government's bank buy-up, the concerted cut in interest rates are all new, substantial measures.  They are necessary and maybe sufficient to damp down the fires.

I believe more interest rate cuts will be needed to increase consumer confidence ... and I am NOT saying it will be business as usual. More banks will fail or merge; the wider economy will now start to rock like a ship on stormy seas.

We have entered a new phase now when ordinary people will no longer be spectators, but feel the effects through job losses, lower economic activity and reduced living standards. It was inevitable. Don't buy anything from anyone who tells you otherwise.



soundoff (52 Responses)
  1. nitesh Pal

    Dear CNN,

    I belive that the world must take a closer look at the Audit firms like ernst and young etc..., because they have to start telling the truth to investors and the general public, by disclosing the actual results of the big firms they represent. They have been covering up losses that have led to this crisis for far too long.

    The christmas vacations to auditors, sponsored by big multinationals must stop.

    A cure to this illness would be goverment controlled audits. This ofcouse is a little more burocratic, but effective.

    Nitesh Pal
    Denmark

    October 9, 2008 at 10:25 am |
  2. Niclas Hjelm, RPT, Sweden

    The light in the tunnel.. ..might be a train coming right at you!

    October 9, 2008 at 10:26 am |
  3. Beat Suter

    I believe the governments go after the wrong institutions (banks).
    The same would be if you punish the messenger for transmitting
    bad news. The problems of the whole "mess" we are in – are the real
    estates. The prices of houses went up – in no relation to the earings of
    the working class. Even when a hurrican struck one area (e.g.Florida)
    instead of prices going down they went up..
    The governments must have a look at the real estate market and
    intervene there. I am not speaking about nationalisation but better
    regulation.

    October 9, 2008 at 10:33 am |
  4. Dr. Riccardo Rovina

    There is light at the end of the tunnel ? Of course but I think what make a difference is the lenght of the road from here to that light.

    I instead not think the interest rate cut they did will be useful.
    Why ? Too easy to be understanded from the most, middle class people feel an increased risk from the banks so the risk increase and the premium for it ( interest) decrease. Than more people will pull out their money from banks. Not forget that this is a trust crisis.

    So that I wait the next moove of the market will be a short break and than fear going back again. Am I wrong ? I will know this answer in one or two weeks.

    October 9, 2008 at 10:55 am |
  5. Mehmet Kurtkaya

    The title s misleading, of course it is years too early to even claim to see a light anywhere. There has to be massive reorganization of societies around the world and this cannot be done overnight.

    I am appaled that CNN devotes all its coverage to plays around with daily articles about loans, rate cuts. These are gimmcks to fundamental problems.

    Why don't you give more coverage to people who can think outside box?

    To Chomsky's, Moores, and Naders and many more intelligent people who have real things to say rather than getting carried away withdaily ups and downs. That would be a service, I am not sure CNN is up to that task but at least many people around the world see more than the "living beyond the means" saga.

    Your Hawking interview was right on the spot! We need to hear more from intelligent people and less from financial pundits.

    October 9, 2008 at 10:57 am |
  6. Newsjunky

    You say "the wider economy will now start to rock like a ship on stormy seas” after plugging the "holes in the sinking ship". It is clear that no-one is navigating, or they've lost the compass. Let's hope it doesn't hit the rocks!

    October 9, 2008 at 11:14 am |
  7. Lisa from DC

    I really have to wonder at the end of the day, in regards to the markets not repsonding well even with the passing of the $700 Billion "rescue", if it was overkill on Paulsen, Bernake and Bush's (3 amigos) part.

    Lets face it, before the bail...err.."rescue" package was passed, all the world heard was gloom, despair, a Depression we havent seen since the 20's, people will lose jobs, investments, retirement.

    Its no wonder that the world and the citizens of this country have been paralyzed by fear. Its one thing to say that look we have a problem here, but its a delicate balance of saying we are in trouble, yet trying to sell to the taxpayers of this country that we need to use taxpayers money for this bailout and yet not create hysteria.

    Well..it has created a global hysteria. This is what putting on the show for a week by the 3 AMigos has gotten us-hysterical. Even though I have felt a little of the crunch, I have not really seen a impact. Now we are not poor, but we are those average Americans who both work, pay taxes, own a home, pay all of our bills on time, contribute to our retirement, put money away for college for our toddler AND have whole life policies for all of us. We are doing everything as AMericans that we should be doing.

    As for those that are not "average", are retired, lost their homes, or base their career in stocks, or work for any of these banks or financial houses, well...I suppose that they are feeling the hysteria more.

    But who are we bailing out here? People and businesses that took risk and lost. Before we bought our 1st home 5 yrs ago, we did our research on the kinds of loans that were available. We also worked extra hours and saved to put money down on a home. No one really ever has the 20% required ideally if you are a first time home buyer-thats just ludicrous, but we did have 10%. We did pay a little higher interest, but also bought down a point.

    We went with a conventional 30 year mortgage. I dont know why anyone would do anything less than a conventional. Thats risk.

    We improved our home over 5 yrs and had it on the market in August. We sold it in a week. Unheard of during this mortgage crisis? Not really. If you think buying a home and not putting any money in to it will bring willing buyers to your house-you are sadly mistaken. We put about $25K over 5 yrs in to it with upgrades. We profited $40K on a house we originally only paid $192K for just 30 miles suoth est of DC in MD.

    We bought our new house at $400K. It was on the market for a year, orignal price tag of $467K. We put down $50K and closed in Sept. Unfortunately, we have a 30 yr fixed conventional at 6.6%. That stinks, but we got the house at a great price and we can always refinance later. Our house was appraised at closing at $423K-so we are in good shape.

    THIS is how its done. Work your rear ends off, take care of what you have, invest in your house and it pays 2-fold.

    I will say that I will be REALLY ticked off if these people who did the dumb-dumb thing and went in to foreclosure are now offered back their home at a reduced value and refinance at a lower interest rate than what we paid. This would really be unjust. We could refinance soon because we would have to pay MORE closing costs on a house we just closed on. It would cost us another $10K to do so.

    If they are going to offer dumb people a great reduced value and reduced rate lower than what I just closed on a month ago aat 6.6%-this will go to the Hill.

    October 9, 2008 at 11:20 am |
  8. Mos

    Everybody must sign to bailout Lehman Brothers

    http://www.petition.fm/petitions/bailout_lehman/
    Thanks

    October 9, 2008 at 11:21 am |
  9. frans

    The current lack of confidence is simply due to the increase in the price of oil.

    Most modern economies rely on energy to fuel them. The cheaper the energy the better the economy.

    Dumping money in to the financial sector will do nothing but stimulate the wrong sector.

    WTF

    October 9, 2008 at 11:29 am |
  10. James Wood

    I believe the treasury / fed measures will deal with the problem of systemic collapse of the financial system, we are just finding that it all needs a few weeks to take effect. You saw it start yesterday with the midday gains in the US indices.

    But the issue now becomes one of recession, and it is not clear to what extent the markets have priced in reduced earnings forecasts. Personally I do not believe that the world is ending so I rule out a depression.

    But unless the credit freeze is dealt is unjammed, and banks lend to ordinary businesses and people, we will have a severe recession globally. I believe the credit freeze will be fixed through measures like removing mark to market accounting, direct investment into the banks.

    I am optimistic, but from a technical analysis perspective it looks to me quite likely that DOW and S&P will retest the post 9/11 regions if not lows. So that is perhaps another 10% down. So given we are down 38% already this at this point bearable. Anyway charting is not a science so this could be the bottom here.

    October 9, 2008 at 11:38 am |
  11. avenirv

    this is not a problem of wrong choice or liars in buying a house.
    the issue is nobody trusts nobody because these securities that are driving the market down had AAA rating. THIS is the real problem. all these rating agencies with their supersmart guys willingly (so it is a fraud) or unwillingly (so they are very dumb) granted these securities the status of "the best investment securities". and this is the reason so many institutions bought them.
    if you have a bundle of mortgages and other instruments and create a derivative and say, "guys the rating is C" then the buyer will be warned about the pour quality. but these financial instruments had AAA !
    so Lisa, the BIG responsibility lies with the rating agencies and big financial institutions selling these derivatives as investment grade best instruments, for orphans and widows !
    the little guy, the liar or the guy not thinking about his true state is guilty but he didn't claim to the world: my morgage is AAA !

    October 9, 2008 at 11:48 am |
  12. Chin Chan,Woon

    if you believe that the markets is a zero sum game,where did all the money go? to the rich oil producing countries or commodity rich countries or maybe very unproductive activities like Iraq war, Afgan?
    can somebody please explan this to us all?

    Also market participants should see this coming and alarm us all....

    October 9, 2008 at 12:29 pm |
  13. David

    Housing market in the US & UK has been in depression for years!

    Only lower interest rates and easy borrowing keeping the MIRAGE! Of house prices,
    Is a house worth $400k if you need 7x your income?

    How on earth will lower interest rates do anything other than put off the inevitable a recession!!

    The market is trying to correct this mess of easy money & Artificial Interest rates? Just LET IT,

    Lowering interest rates is putting off a recession that WE NEED

    Prolonging it is going to make so much worse,

    The only difference is in this recession some banks might go under, so they are holding out their hands, let them fail; let their competition buy them out,

    let the MARKET RULE!

    A businessman with US & UK Clients
    who is very disapointed with the news doing what they are told to say

    October 9, 2008 at 12:30 pm |
  14. David

    Hear in the UK, we are giving the BANKS a total of 600billion,!

    Part of the deal Barclays bank will get some $50bln (£25bln)

    but they must Buy out part of Leyman Bro's

    $2.5Billion of this deal is allocated to pay the directors of Layman Bro's BONUSES in their contract, They same people who ran it into the ground,

    WE ARE BEEING ROBBED.

    October 9, 2008 at 12:36 pm |
  15. walter

    Yes the light in the tunnel is there. There are very healthy reactions: the credit card limits in the US became lower, the surviving banks in the US became commercial banks, it is clear which banks are hurt and which are without damage. Especially local and traditional banks are without damage. So the market has done it's work: wiping out the bad ones. ING bought a bunch of clients from an Icelandic bank (brilliant deal). Things to be done is a new system of quality control in banking, so banks know who is credible. Governments and central banks undertook swift reactions and cooperated.
    And, we will face a good recession in the US economy because of diminished consumption. But capital supply will be larger by that. It will be a deep but healthy recession; US citizens are disciplined in their expenditures. So far so good. Picking up the pieces and get on.
    And let the CEO's of AIG pay for themselves.

    October 9, 2008 at 12:41 pm |
  16. Realitycheck

    The recent financial meltdown will teach us all to stop expecting Immediate financial gratification like 5 year olds. We (Americans) in Wall Street and Main Street are simply obsesed with short-term gains and a very small apetite for personal savings.

    Little story: in 1999 my neighbors sold their 2 cars to play the stock market, with the hudge gains they bought and flipped 4 homes in Florida in 2005, with the proceeds from this bought a 7 bedroom suburban house with a pool which was repossesed in 2007. Today they live in a 2 bedroom apartment without heating because they can afford it. Get the picture? .....

    October 9, 2008 at 1:00 pm |
  17. mary rose grech

    only prayers can save us ,even us in malta

    October 9, 2008 at 1:00 pm |
  18. Raju

    I don't think we need to wait for the light at the end of tunnel. This WILL HAPPEN AGAIN.

    The problem is all this financial experts, the investment companies. A lot of them went and sold high risk stocks to pension boards, to public entities, to people. I lost count of the number of calls stock brokers made to me, to convince me to buy stocks because it went up gazillion percent the last quarter.

    When they sell, they cannot just tell people the positives of it, but they must tell them the risk of putting your money. Some brokers basically lied to their investors.

    They have all become nothing but snake oil merchants.

    I have come to a conclusion that without regulation, this will happen again. People become old, and they forget prior hardships, and they forget how they got run over by these snake oil merchants like Goldman Sachs & Lehman Bros.

    Light will always be coming at you. But we should learn from this. REGULATE THE SNAKES.

    October 9, 2008 at 1:15 pm |
  19. jim

    Dear nitesh Pal

    I take it you are a government auditor and possibly could not make it in Big 4 firm – typical blame the auditor not management or the company that are ultimately responsible for the financial statements. Hate to tell you even govermnet auditors have a hard time to detect fraud.

    Realisticly an audit can not be so burdensome to a company that it inhibits that company from doing business – this is exactly what a government audit would do!

    October 9, 2008 at 1:26 pm |
  20. Jan Willemse

    About the E&Y and PWC of this world you are so correct.
    In my previous live I was a VP of an Americna responsable for the markets based in European, Africa and Middle East, the Christmas controles as you name them is not fiction.
    Having one company auditing your entity should be changed to a let us say three year contract >after that you choose another auditor.

    October 9, 2008 at 1:32 pm |
  21. Mike from Ontario (Canada)

    Nice to hear in today's paper McCain's plan to bail out directly those poor unfortunates who took out "pick a pay" mortgages and now find themselves seriously under water as they meet the real world and have to pay market rates. Where does it say we all have a right to own a home??? If you work hard, save your pennies, rent till you can afford to put down a reasonable down payment and once your budget allows purchase a home, that's one thing. But minimal downpayments and variable rate mortgages are like Vegas- you're playing a game with big risks. If you get burned, should ordinary folks who played the game the conservative way bail you out?? NOT !!!

    October 9, 2008 at 1:43 pm |
  22. murat

    that light may be the light in the spa's the executives are visiting with this bailout money. this is poposterous, these people even hurt me while im living in holland, even i feel the pain of their lies, deceivement and mistakes, while we are getting poor they are getting richer and richer, while we are losing our savings they are living of our savings, they should be punished not rewarded with 700 billion dollars of tax payers who dont even see one cent of that money,people cant pay rent or pay for food, that 700 billion should go directly to them and the us has to bailout all the world economies because the us is the one to blame fo the economic crisis in the whole world, its a shame but then al the things the us governement has decided in the last 8 years have been a disaster so im not suprised. we should change the way we live, the way we live and the way we treat eachother, the poor is getting more poor and the rich are getting richer, in a few years their wont be anymore middleclass but only lower and upperclass.banks are lending they have lend them selfs, thats not logical, thats a recepy for disaster, and now its well cooked.

    October 9, 2008 at 2:07 pm |
  23. Mike

    Thanks Richard, I have been following your comments on CNN and good to have you back reporting on business and finance – finally! You say it as it can be understood to the layman and to economists who daren't utter the truth.
    One question – there is no recession yet, especially as the forecast for world growth remains positive (3%) this year; how will the combined efforts (bailouts, int rate cuts) impact on growth? When will it flatten before rising? Thanks

    October 9, 2008 at 2:34 pm |
  24. Timothy Powell

    Just wanted to check in with what happened to our family and it's mortgage in the past few yrs. About 3 yrs ago we had a mortgage with First National Bank of Danville, IL. We had a fixed mortgage before that time and found what we though was a profitable investment in real estate so we re-financed. The Vice President of the Bank, Cindy Marks then put us on a ballon payment, to re-do in 3 yrs. Last Feb. when the note came due she informed us the interest would go up about 1.5%. Too high of payments for our budget. We sought other financing and found it. The change in our payments was $250 more, had we just re-signed with the First National of Danville. When gas, food, power and most every thing else went up, we would not have been able under Cindy's plan to survive. Not doing very well as things are either. You can see things could have gone much worse for us. It's not just wall street though. These local banks set the people up for the fall that now is, and sold many of these bad loans to wall street investors. These banks knew the borrowers would not be able to pay if the mortgage payments went up but did it anyway. When the value of the mortgaged property fell by 30%, and interest went up 2 or 3%, many borrowers could not keep up while others just cashed in the bad mortgage investments because the value fell so much. The renters in those homes are the ones the Cook County Sheriff decided not to evict. The local bankers set these people up and dumped the burden on Wall Street.

    October 9, 2008 at 2:43 pm |
  25. Bob

    Light at the end of the tunnel. Sounds like a near death experience.
    We should look away from the future and make up the balance of where we stand right now.

    This economic crisis is another warning that we underestimate the toxic effects of our economy. Scientist already made it clear that our current lifestyle will destroy our environment forever.
    We take a immense credit on earth resources, and we can't rescue the economy without saving the environment from our greed first.

    We tend to define oil, coal and gas-fields as reserves, but in my opinion that is a misunderstanding. The build up of those fields during millions of years slowly caused the climate to stabilise. They should be encountered as a delicate climate-buffer which eventually made mammal life possible.

    Exploring this climate-buffer is releasing the ancient glow of the sun into the sunlight we already receive each new day. In other words, we switched on the suns afterburner. It is no wonder the atmosphere gets warmer and becomes more hostile and unpredictable to us.

    The bank assets are the buffer necessary to stabilise the economic climate. Releasing more money into the market by governments restores the credit-flow but is also likely to increase the suns aftereffects, just while we are so desperately in need of little shadow to cool down and keep our minds clear for what is really going on right now.

    At this point it looks like there are two lights at the end of the tunnel. Near to the deathly borders of our habitat, we better pick the right one to navigate on.

    October 9, 2008 at 3:08 pm |
  26. Laura

    I have always lived with in my means. I find that if I don't spend what I don't have then times like these have less affect on me and my
    security. My investments in the market will stay there and time has shown it has always been ok in the long run.
    I just need to wait. As I said this is the benifit of not having debt.
    I am 62 and own my home. I have never gone into debt for a home loager than I could not afford.

    October 9, 2008 at 4:06 pm |
  27. H. Hicks, Florida

    There is a light at the end of the tunnel–and it's call financial failure.
    In order for our government, banks, and financial institiutions to be seucre–there must be collateral in place to support loans. Simple premise–much ignored.

    You can't just print the money you need if you're a government. If you're a citizen and you borrow on credit–you had best make certain you are capable of paying for the debt–less your credit is ruined. Why should a business entity be any less accountable than the average citizen?

    If we are to ever pull ourselves out of this.
    Politicians need to ensure we make a living wage.
    We need to make sure we live within our means–and take only the credit that we can afford to pay.
    Government and individuals need to have a rainy day fund in savings.

    October 9, 2008 at 5:12 pm |
  28. Nikhil Shah

    Hi,

    This is a New Economic Realm we are in, again, unfortunately, it is happening due to Financial Markets greed in USA and partly Europe.

    This change was unfolding thru an Ecological Switch, we have all to face upto yet.

    We, in our greed, for MORE, of everything, have lost our sense and sensibility for Ecology, the Needy and the Challenged living around us and away, as we hurtled almost blindly towards Economic and Material ecstasy we lied, cheated and robbed till we Dropped!!

    Lets look around, not much is lost, Governments are acting in
    a matured and timely manner, right strategic moves are being made and most of all they are thinking, planning and working together, this is almost fantastic!!
    AND this time around it is not a WAR ! they are doing this for the People.

    So, lets STOP right here and take this opportunity to look at our own apathy, Consumption, I care a damn what and who suffers, lets take over the world, Whats Nature and Natural, etc. etc.

    Lets SLOW down, Lets promote sustainability, lets create small healthy indigenous And regional business models and also go Global but with an attitude to blend-in Without spilling over their glass.

    Lets involve Nature and Natural to our venture.

    Lets send every one of the Bankers and their staff to 200 days of community service,
    Including dropping the top bosses with their Golden Parachutes in Somalia and Ruwanda, where they understand true Human Values.

    Nikhil Shah
    architect
    +91 98922 60976

    October 9, 2008 at 5:48 pm |
  29. jim

    Am i stupid? where did all the billions of profits all the world banks made over the years, go?. did it all go to shareholders ?. why did they not keep some for rainy day. surely there must be money lying around somewhere?. Jim

    October 9, 2008 at 5:56 pm |
  30. d nelson

    Really now, the end of the tunnel. Certainly not tunnel vision.

    The economic systems which count on unlimited consumption of goods on a planet with limited resources will end. That is reality. When will it end and how? Depends on whether greed or thoughtful compassion is the ethic driving the theory.

    October 9, 2008 at 6:16 pm |
  31. Shaun Divecha

    There is no light at the end of the tunnel, we are at the end of the tunnel, and now that we're exposed to the light, things aren't looking too good. We're scared, and we are beginning to fear the free market economy as we see the market take revenge on corporations that were essentially fixing the market with their mortgages. Now credit is in a crisis, and companies can't afford to operate, let them fail. Policy has done nothing but make things worse, nothing the Fed has done or the government is willing to do can fix this situation. Now that we're out of the tunnel we can't tun around and go back, its a one way tunnel, we have to stick it out until the next tunnel comes around and we can find something else to hide behind. If the government interferes now, businesses are no longer going to be accountable for their actions, they won't be worried about making sound investments because the government is going to bail them out, and the bail out money does not come from the shareholders so why would they care where the money is spent. These companies need to fail so that market can begin to take shape again, We sat on the bubble and it exploded, it's not the first time it has happened, and when everyone was saying this time it's different and this growth is never going to end we failed to learn our lesson from history. The market will always stabilize itself, the best thing about capitalism is that the market allocates capital to where it should be. We need to ride this out now that it's started we can't expect a quick end to this.

    October 9, 2008 at 6:38 pm |
  32. Ramanath

    Well said Laura, Murat , Raju & others.The bottom line is simple maths,
    1.don't spend beyond means(certainly not by taking credits).
    2.don't spend on anything which is very essential for your survival at comfort.
    3 stop the plastic cards & switch to cash transactions.
    4.understand that the game is played by banks,businessmen & a failing Governement knowingly(it is not that there is no technlology or experts who could have predicted this mess long back,remember we are able to predict eluding asteroids smashing us or hurricanes ripping,they just kept it under the carpet).What logic they have in giving 4% for your money as deposit when they charge you 30% for borrowing,where does the profits go??why do they call you irritating you so many times to buy a loan & give credits more than 5 times a earning capacity of a person??they trap you & you have to keep paying them untill you breakdown.Then they will ask taxpayers to payup the bad debts too by asking the Government to bailout.This will keep repeating time & time again creating only two class of people.The super rich(thieves) & utter poor eliminating the middle class altogether.
    5.A good Government should ensure such daylight robbery is eliminated by bringing in proper regulations & monitoring of lending,investing & savings.It doesn't need a rocket science to understand this fundamentals.

    October 9, 2008 at 7:03 pm |
  33. Gonzalo Rosselló

    This is just global hysteria... We haven't seen "normal" companies go bankrupt. Microsoft will continue selling systems, Citibank will try to go after another bank, Apple will continue to sell Ipods and you will continue to drink Cocacola.

    Buy, buy, buy... better is you buy homes in the USA (or wait a few weeks). They will never be this cheaper again. Most probably you will be rich in a few month. Friends of mine did this after 9/11 and become wealthier in the following months. It is a fact, look at the charts after 9/11.

    There is light at the end of the tunnel... wait, what tunnel?

    Regards from Santiago, Chile

    Gonzalo

    October 9, 2008 at 7:50 pm |
  34. Vicente Ribeiro

    the truth is... all that "lost money" went to the same place where it came from... "nowhere"

    October 9, 2008 at 8:18 pm |
  35. Gatto

    After spending many years studying environmental economics it became increasing clearer to me that goods and services rarely or never factored in the energy prices for the products. Take for example a PC if it takes three barrels of Oil to make it and ship it at $100 a barrel, then how can it be on sale for $500 including all taxes. Simple the energy consumption was never taken into consideration.

    Now if we look at the current market situation the debit function was never taken into consideration in the purchase price of goods and services. Debit is equal to the only thing humans have to give “work” or labor, so the whole idea is based on that if you borrow money you will “work” to pay it off over time. Problem is if you get a point were as a country the number of labor hours available per day, is less then the sum owed, the whole system will fall over. We simply cannot work more than 24 hours a day as Country.

    The surprising thing is all the countries want their money back at the same time. It is very much like a closing down sale at a shoe store, everyone rushes in grabs what they can and leaves as quick as they can “cause it is crazy in there”.

    At a guess the light at the end of the tunnel will be the DOW falling back to 2003 levels (7,500 – 8,500), after the recovery of the DOT COM bubble. Which may sound bad, but really if you look at the history of the dow we have climb a very long way in a very short amount of time and it now seems it was all based on debit, rather than hard work.

    Tip: Pay off your credit card and then cut them up. That way you stop spending someone elses money.

    October 9, 2008 at 8:41 pm |
  36. Karla

    I strongly belive that a lot of investor are holding and selling their shares for fear that Barac Obama will win the elections. After all, he is the one that is talking about taxing capital gains.

    October 9, 2008 at 8:57 pm |
  37. Female realist

    It is very easy to be pessimistic, but this is probably the end of the beginning. We need to change our way of living, stop consumption, be more sustainable, and stop borrowing for living a life we cannot afford. Cash will be modern again. Saving in banks with an ordinary interet rate. All complicated financial instruments will just be a memory. Bonuses will be more moderate.

    Time of change has come, and sustainability in all areas will be hot, real hot.

    October 9, 2008 at 9:29 pm |
  38. d. griffith

    In order to survive this mass,is to, live like the TV series The Walton's. Two or three generations under one roof, with one truck. That way you will have combined income, workers,driver,homemaker and day care.

    October 9, 2008 at 11:25 pm |
  39. CharlieF

    I would like to invite people to read this...

    http://financialsense.com/fsu/editorials/amerman/2008/0917.html

    I read this a few weeks ago and as such have not been surprised at all that markets continue to crash.

    I would love Richard to comment on these credit derivatives.

    I think these companies who allowed (make that gave them outlandish pay and bonuses) staff and executives to conduct this credit derivative fraud should be allowed to go broke and then the liquidators (with the assistance of lawmakers) should sue all of these people and recover as much as possible from them.

    October 10, 2008 at 8:24 am |
  40. Divesh Chawla, Mumbai

    "Due to recent budget cuts and the rising cost of electricity and oil, the light at the end of the tunnel has been turned off"

    October 10, 2008 at 8:29 am |
  41. CharlieF

    A follow up question for Richard...As a mug I would like an expert like Richard, who does a great job of explaining things in layman's terms, why is what has happened here with AIG, Bear Sterns etc etc much different from Eron?

    Eron executives and auditors were confronted and punished for their greed and Enron deservedly is where it should be now...dead and buried!

    But now instead of being confronted, it seems to me they are being allowed to take their ill-deserved money all the way 'from' the bank!

    October 10, 2008 at 8:39 am |
  42. David B.

    Mos must be kidding.
    How could anyone justify saving LEH when one man in management took $500M over 5 years.
    Suffer, LEH is a microscope into the cause of the problem and bailing them out would send the wrong message.
    Pay it back or suffer

    October 10, 2008 at 11:00 am |
  43. Robert Kornfeld

    At this point a large part of the problem is fear. It is said that investors only have two emotions: fear and greed. We have gone from all greed to all fear. I think that we need some inspiring words. Leaders like Churchill and FDR could find words for these moments, like "We have nothing to fear but fear itself."

    President Bush is starting to sound like Mumbly Joe, I think because he sees his number one job right now as staying out of sight and not endangering McCain's chances.

    October 10, 2008 at 7:51 pm |
  44. Joey Legarda

    After this nightmare is over things will really change. The first major change will be Americas economic position will change.Although we will always be unavoidably interconnected through the banking systems but I think important firewalls must be established so as to avoid toxic financial products being passed on.
    This nightmare will last for a while yet, not until all the chips have fallen where they must.
    In a way we have not seen the worst yet.
    This period of a certain way of cleaning up the decadent financial system is only just starting.
    American blue chip companies will be the next to fall.
    GM who said that they are not thinking of chapter eleven are now on merger talks w/ Crysler..The real problem is car sales in America will really take a nose dive. In a way not even mergers will save some companies. Because the world as it is today is over banked & over industrialized just when consumers have much less money in their pockets.

    October 11, 2008 at 6:57 am |
  45. Uma in Liverpool, UK

    My dear Mr Quest,

    I enjoy your commentary tremendously. It is informative, and since I started out knowing nothing at all about the Stock Market, I commend your teaching skills.

    That 'light', however, is merely the lamp on the helmet of a seriously lost coal-miner.

    Put your glasses back on, sir.

    Uma

    October 11, 2008 at 7:15 am |
  46. sunit jain

    Some one must be held responsible for all this .
    How can a century old Lehman Bros gone out of business just like that , Isnt there any responsibility of LB towards there coustmers ,

    it seems that in USA any body can go off the business legally without giving any answer to their coustmers

    HOW SUCH A HUGE AMT. WAS DRAINED OFF & EVERY BODY WAS LOOKING SILENTLY & PUTTING THE WORLD IN DOLDRUM
    Thanks
    Sunit Jain
    New Delhi

    October 11, 2008 at 8:07 am |
  47. beat S

    who said " the light at the end of the tunnel is the headlight of the approaching train " ?

    October 11, 2008 at 4:24 pm |
  48. Uma in Liverpool, UK

    Is it worth mentioning that after the G7 meeting, Prez Dubya Bush announced, 'significant progress...' and that the public can '...anticipate a positive future', at precisely the same time as the International Monetary Fund announced 'the international economy is on the brink of a systemic meltdown' - which they've been warning people about for six months - and the IMF also said that the G7 Leaders 'have failed to restore confidence'?

    I mean, we've been hearing the same lies from the Prez for years. The more he says a thing, the less likely it is, to be true. He's been banging on about how the economy is going to be hunky-dory, (with the exception of when he was begging Congress to pass the Paulson Plan), since the US economy started to tank, in early 2007. The man has negative credibility!

    The IMF, on the other hand, haven't said much. What they've said, most of the G7 have studiously ignored.

    Gosh, Mr Quest, *wide-eyed* what does a 'Systemic Meltdown' look like? Is it sort of like the Polar Ice Caps, only with drowning people, instead of polar bears?

    I was watching your 'aeroplane graveyard' episode of Biz Traveller today (big 'plane-geek, me too! :-)), thinking: why are they cannibalising those 'planes for other 'planes?

    The bigger ones in particular, fitted out with solar panels and super-efficient fluid reclamation/recycling systems, with the furniture rearranged, dividers put in, and provisions for cooking and bathing (possibly inside the hollowed-out engines?) could house quite a large number of people, who need low-cost housing!

    They have nice, built-in bars and cinemas, internet access, phones. The upstairs, flash section of the 'plane would provide built-in nightlife for the community. Even with very spacious accomodations, an old Boeing 727 could house at least six large families in comfort. A 747 could house ten, at least!

    If the 'planes were all placed nose-to-nose, the residents of each group of flats could visit the others, allowing those in the little 'planes to take advantage of the bars (add an electric hob, and it's a bar and grill!).

    Everyone living in the 'plane-graveyard housing would have a job: maintaining the solar panels, cleaning, cooking, requisitions, and hey - don't forget those cargo-holds, for people who aren't fussy about their housing! They'd be carpeted, partitioned, lit, and could even have amenities like squash-courts put in!

    Turn a couple of Jumbo engines on end, fill them up with water, and that's the water supply for one 'plane-housing-unit, providing evaporation is kept to a minimum. There is no shortage of electricity. Solar panels all over the fuselages and across the wingspans in the Mojave Desert is plenty of air-conditioning, light, cooking fuel, and power to generators working the water reservoirs. The biggest expenses would be food and water, and buying in bulk brings the costs way down. It could help out the airline catering businesses, too! No rubbish Coach food. Proper meals, for everyone!

    If I were half my age, I'd live there in a heartbeat! They'd be a bit like horizontal arcologies, only not completely self-sufficient. It's past time for arcologies! Those poor 'planes... they'd be happier as flats. I'm certain of it. (You understand, of course, that 'planes are alive. ;-) Much like balloons, cars, and computers...)

    October 11, 2008 at 8:51 pm |
  49. Thiyia DM , Germany

    When ENRON collapsed , appropriate action was taken : Their executives & their auditors were handcuffed in front of camera !
    We , as investors, cheered ! Why ? This is a signal for we people
    to have confidence in the US system. No fraud, no cheating, no lies !
    Wall Street shot up on that day ! Indirectly it is not "Wall Street" shot up , BUT the CONFIDENCE of investors ! The result , the companies,banks etc were running without a hitch. Normal business as usual . No financial crisis at that time but a little drop in Wall Street. The confidence was there !

    If the US have applied the same punishment (as they applied to ENRON) to Bear Stearns , AIG , Lehmen , we people would have developed confidence in the US System ! I believe global financial crisis would not have spread / occured. Because we would have trusted your US system ! ACTION IS BETTER THAN WORDS !

    The US govt want to go round saving these companies. Why ? Because they are their " big heros" in the US ? Let them die and bury them as you did to Enron. Once a traitor always a traitor. Confiscate their assets and return to the poor investors. Use the 700Billion to create new companies ( eg. new insurance company – replacing AIG) ) with new leaders with strict regulation. AIG staff are enjoying life at luxurious hotels at our (investors) expense. Just greedy , dirty and ugly behaviour.

    We people are "Wall Street" ! Wall Street need us ,as investors to buy their shares. When we buy their shares .....then their company is "working". Wall Street , the Banking System and Companies are all entangled together. One goes down, it will bring ALL down .

    Please US politicians .....do not appear in camera and talk too much
    what you want to do and don't pacify people to be calm.
    People voted for you ....just do your work diligently , you too are well paid don't you ? : ie SHOW CONCRETE WORKABLE ACTION !!

    There will be " No genuine light at the end of the tunnel " then , dear Mr.Richard Quest. I really admire you when you appear on TV and "fighting" like a "wild cat" on certain issue. Thank you very much for your courage !

    October 12, 2008 at 2:38 pm |
  50. Quintus Mc Guire

    My comment is a question. Is there a big need in the future for special managers,with financial intelligence?I am very concerned with the quality of management.
    Do we need more of this type of disipline in this area?

    October 12, 2008 at 7:42 pm |
  51. Stephan Jaeckel

    Richard,

    everything is fine and has always been... just read what they write at

    http://www.ustreas.gov/topics/financial-markets/

    "The United States has the strongest, deepest and most liquid capital markets in the world. As markets around the world strive to reach the U.S. standard of excellence, we must not take our position of leadership for granted. Secretary Paulson believes in promoting healthy capital markets that protect investors while encouraging innovation and job creation."

    Maybe we all just have a bad dream?

    October 27, 2008 at 6:30 pm |
  52. Alex

    Nitesh, who are these auditors who "represent" these big multinationals. Audit firms are independent, by law and practice. And what do you mean by "government contolled audits"? Do you mean audits conducted under conditions specified by law and laid bare for everyone to see? Well, we have those already.

    I've been on a lot of audit teams, and you would not believe how seriously these people take their jobs and how important it is when they find something that doesn't look right.

    I just wonder what exactly you are getting at that needs to be fixed? If you were in the US then I could understand your frustration with US accounting standards. But the principles-based standards in much of the rest of the world seem to deal with your issues already.

    November 1, 2008 at 12:08 am |

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