August 9th, 2011
02:23 PM GMT
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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.

soundoff (2 Responses)
  1. Babu

    I think that all time when Stock Exchange exist the entire word will be expose to one big risk to crack down. The word gone down in '30 years from the Stock Exchange crack. From the game playd by persons like mister Soros and other people like him, it's very esy to go in crack down. Why to be permanently the word expose to this risk? We can't find a other way to finance the economic activity in that quick grow and crack down to be imposible?

    August 10, 2011 at 9:54 am |
  2. Per Holmlund

    Double dip.

    Perhaps a new normal. Short up turns and long down turns. Or even worse no upturns. Only shorter positive Stock Market up turns to keep the American dream and Wall Street alive.

    Look at the 30 & 10 Yr bond spread. Do you see the Polinomics 2008 and first half 2007? Main street still in deep water. Deep water that becomes deeper and deeper with the deficit swamp spreading.

    What will SOS – Save Our Stocks – the market this time? Perhaps it is time to stress test retirement funds. And not fun but the possibility for Carter II not moving north. "HOPE? Bob Hope! No. Obama." Yesterday it was made as joke. Today just tragic.

    2000 Stock Market crisis, 2007 Financial crisis and 201X Economic crisis. X shouldn't be 1 because of polinomics and election cycle economics but you never know. 201X depression, deflation, deprecations, depressions...

    The dream became a joke. The American Joke: Apple highest capitalized company. I for Intelligence or Idiots? No for pods today made by Apple but tomorrow...

    August 10, 2011 at 5:07 pm |

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