LONDON, England – The following is best sung to the tune of "Teddy Bears' Picnic"...
If you go down to Wall Street today you're sure of a big surprise
If you go down to the City today you'd better go in disguise
For this was the week
When everything fell
From stocks and bonds and everything else
For this was the week those terrible bears had their picnic
(Please feel free to add your own verses...)
LONDON, England - I have just heard the UK finance minister Alistair Darling being interviewed by my colleague Adrian Finighan.
Darling did the age-old shriek of "something must be done" but, in a unique departure for politician, he accepted that he is part of the group that has to do something about it.
Of course he will be attending this weekend's G7 meeting in a strong position, having announced a £500 billion package that included part nationalizing Britain's banks, guaranteeing interbank lending and injecting more liquidity into the system.
His bailout has been well received by the financial world and experts alike. In the naughty classroom of finance ministers he can turn round and say: "My hands are clean."
Darling even admitted that he has been saying he would do "whatever needs to be done." Even he now realizes its time to stop the talking and do something.
But this shriek of "something must be done" is a bit disingenuous. It is 12 months since the credit markets first seized up, and we are only now getting macro economic policy responses on a co-ordinated scale.
Better late than never - but let's hope it's not too late.
LONDON, England - It pains me to remind Todd Benjamin, but last year when the credit markets first seized in August, he was AGAINST any immediate cuts in interest rates. He was AGAINST any co-ordinated response. And he was AGAINST anything that smacked of recognizing the fact that urgent action needed to be taken then! He didn't believe in using monetary policy to bail out the market.
I am not saying a cut would have done the deed, but I do believe, as I said then, that an element of urgency was required.
LONDON, England - It is not hard to see why the markets have fallen so sharply today. They believe no-one is at the helm. They believe that the policy responses we have seen so far are too little.
And in this scenario investors want out.
If you doubt what I say, ask youself. What are you doing in your investment decisions? Have you sold or gone into cash? I know we are all waiting to get back into the market, to get some stocks cheap, but is this the time?
The problem is that if you thought about buying last week, when the shares were down, you would have got burned - they fell further. So why do it this week when they might fall further and you can buy them even cheaper next week?
It is the oldest asset falling problems in the world. No-one will buy until they believe the shares have actually hit bottom or are at least bouncing around that area. The so called bottom fishers have not yet arrived.
LONDON, England - What do you expect finance ministers meeting in Washington to say? I have had some thoughts (below), and I want to read yours:
We, Finance Ministers and Central Bank Governors, met today to evaluate the global economic outlook (and were pretty horrified by how the markets have stuck two fingers up at our responses so far ...)
We have committed ourselves to ensuring the stability of the world financial system (but frankly, we don't know what to do next ... Hank's idea didn't really work ... Alistair's plan in London was interesting and is getting a lot of credit ... as for poor Trichet, not sure what he is up to ...)
We believe that our economies are fundamentally sound (hey guys, we have to say this, even though so many of us are heading into deep recession ... )
And that we will co-ordinate activity to ensure the return to steady growth (assuming any of us can afford to make an international phone call after we have finally paid the bank bailout plan – Hank? will you take a collect call?)
We commit ourselves to the successful conclusion of the Doha round of World Trade Talks. (Hey guys – don't forget, we always add this bit into every G7 statement ...)
At that point, most of the so-called G7 sherpas decide the G7 ministers need to be removed to a place where they can't do any more damage to themselves or others.
Now then – add your own touch to this G7 communique.
LONDON, England - I read a few surveys lately that alarmed even me. When asked the best place to keep your money, the stock market, a bank deposit CD, or under your mattress, 45 percent of those responding said under the mattress. Another survey showed 60 percent of those polled said a depression is likely.
Not even I, who has been bearish long before this financial meltdown began, believe a depression is likely. That would imply among other things massive unemployment. I don't see that happening. A global recession, absolutely. And even that may have been prevented if authorities had responded sooner to the current crisis, including the ill-fated decision to allow Lehman Brothers to fail.
What authorities are dealing with now is a crisis of confidence that has a stranglehold on the financial system, most people have been affected directly or indirectly. You know from my previous blog that I strongly doubt the bailout plan the U.S. Congress passed would fix the economy there.
Now Treasury Secretary Hank Paulson is coming around to the idea that recapitalization of the banks does make sense. It would be a much better use of the $700 billion than just buying up the toxic debt. The bill passed by Congress allows for that, but up until now it wasn't where Hank and Company were putting their emphasis. It still remains to be seen how far they will go with recapitalisation versus buying up the toxic debt.
The UK government has come up with the most sensible plan to dealing with the crisis, one that has won kudos on both sides of the Atlantic. But what's still missing is a coordinated global approach for the recapitalisation of banks. It's needed. A global interest cut and other actions by central banks aren't enough to restore confidence.
The fallout from the credit crisis is too far along to prevent a global recession. But unless governments pull out all the stops and take radical action, confidence will continue to erode and economies will continue to weaken. And those fearing the worst may not seem so extreme.
Tell me what you think, do you think governments need to recapitalize the banking system? What will it take to restore confidence in the banking system? Do you think those who say a depression is likely are right or wrong?
About Business 360
CNN International's business anchors and correspondents get to grips with the issues affecting world business, and they want your questions and feedback.