August 9th, 2011
02:23 PM GMT
We know the causes of this latest crisis - fear, worry and concern. Three uncomfortable bedfellows that have wreaked havoc on the world's financial markets. What pushed everyone over the edge was the debt ceiling debacle and the downgrading of U.S. debt by ratings agency Standard & Poor’s, that was followed by a 630 point fall in the Dow Jones index.
The markets are basically saying that they are unhappy with the wider economic situation - and with good cause. Manufacturing numbers in the U.S., UK and Germany were all weak last month. Unemployment remains high. Inflation is creeping up in some countries. And the debt situation in Europe is not getting any better.
What the markets are seeking is leadership, and for the moment they believe it is lacking. Take Monday's speech by U.S. President Barack Obama. The Dow had been trading down around 150-200 points until the president started speaking. It was in the hours after his speech the market saw its biggest losses.
Those traders I spoke to outside the New York Stock Exchange said that they were disappointed in what President Obama said. It was the same stuff they had heard many times before. They believed it offered no real new direction or leadership.
They may have a point. The G7 statement on Sunday evening was the same. A long winded statement that said very little. G7 members stand ready to do what is necessary – hardly ground breaking stuff. But that is all the fuel the market has to run on at the moment. Hoary old bromides and promises that everyone is willing to do what is necessary.
I remember an old editor telling me sagely: "Markets don't just crash on a random Tuesday in October." Of course he was right and he was wrong. There is always a moment when the market crack becomes a crash. In this case it is the cumulative effect of the past few sessions. That moment has arrived.
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