Here We Go Again: Black Friday October 24th 2008 Heralds the Failure of the Rescue

“The panic levels are now quite unseen,” said Christian Gattiker, Zurich-based head of equity research at Bank Julius Baer & Co. which manages about $307.6 billion globally. “It’s difficult to have any words for this situation right now.”

The American Administration has failed to stem the tide of the global sell off and credit crisis of 2008.  Once again the banks are hording wealth as the whole bloody mess that we call the stock market comes unglued and panic selling ensues.  There were massive sell offs in Europe and Asia last night and the pre trading on the American Stock Market was so bad it triggered the circuite breakers set at -6% to stop panic selling.  The Word is that Wall Street will open today but everyone and his grandmother is expecting a very ugly day as panic returns to Wall Street.

Trading in futures on the Standard & Poor’s 500 Index and the Dow Jones Industrial Average was limited to prevent contracts from further declines after drops of more than 6 percent. The U.K.’s FTSE 100 Index sank 7.5 percent and the pound slid the most versus the dollar since 1971 after the economy shrank for the first time since 1992. South Korea’s Kospi Index slumped 10 percent as the country’s economy grew at the slowest pace in four years.

Trading below the “limit down” level for the S&P 500 futures will resume when U.S. exchanges open for regular trading at 9:30 a.m. New York time, said Jeremy Hughes, a London-based spokesman for the Chicago Mercantile Exchange.

The Automakers are getting flattened and even Toyota is reporting a decrease in sales.  Oil prices are tanking as OPEC tries to cut production but fearing that the global turndown, the prospect of a global economic depression, will continue to suppress demand for the foreseeable future. The Russians have suspended trading on their stock market as the collapsing price of oil deals them one concussing blow after another and they wont reopen until the 28th of October.

“The sum of all fears is driving asset prices down — oil, defaults, ruble-devaluation risk and the fear of a massive cut in earnings growth,” said Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow. “For investors oil is the critical factor as everything hinges on the amount of oil revenue that the country earns.”

Crude for December delivery tumbled $3.42, or 5 percent, to $64.42 a barrel in New York on concern OPEC’s output cut, announced today, won’t stem the slide in prices and demand.

 Gold is down, commodities are down, stocks are down but mattress sales of beds with special compartments for stashing cash are through the roof. It’s a worldwide panic and it comes on the heels of extraordinary government actions across the globe to stop exactly what’s resuming today.  The loss of confidence in the world’s economy is a dagger leveled at the jugular of companies and governments around the world and recovery is going to take years and its going to be painful. 

A measure of banks’ willingness to lend, the London interbank offered rate for overnight dollars, rose for a second day after declining for nine days. The Libor-OIS spread, a gauge of cash availability that measures the difference between the three-month rate and the overnight indexed swap rate, widened 8 basis points to 262 basis points, the British Bankers’ Association said.

With the failure of the world’s central banks and the governments of the top economys I think that today may well be seen as the start of the next Great Depression.  People aren’t spending anymore and I don’t think that’s going to change anytime soon.  I think the central banks and government intervention has failed and later in the crisis will be found to have made matter much worse.

It turns out that the great generational challenge we face is not the War on Terror but an Economic Challenge that will shake the foundations of our nation in a way that makes 911 look like Romper Room.

We’re in big trouble folks and today is going to be long and troubling.

But who is going to clean this mess up?  What are we going to do?  Who’s going to take the lead?  Who?   Bush?  No!  In the short term the world leader with the most influence on the world economic meltdown seems to be Nicolas Sarkozy of France.  That’s right: France.  The Crisis fell during his term as EU President and he’s been running point on the matter from its inception in addition to taking the lead in Europes response to the Russian Georgian war. 

All quotes in this article were taken from storys on Bloomberg this morning and I leave you with a few more on the intriguing Mr. Sarkozy of France.

The nominally pro-American Sarkozy, who ran as a pro- business candidate last year against Socialist Segolene Royal, is taking his crusade for a “re-founding of global capitalism” to Beijing today, when European leaders meet with the heads of 16 Asian countries including China, India and Japan. His next chance comes at the first in a series of global summits addressing financial markets slated for Nov. 15 in the Washington area.

“Nothing in the global economy will be the same as before,” Sarkozy said yesterday in Annecy, France, as he announced plans to create a sovereign wealth fund to invest in French companies, protecting them from foreign “predators” after the global stock-market rout.

Sarkozy’s Presidency

The crisis struck during Sarkozy’s six-month term as European Union president, enabling him to marshal the EU’s response and festoon it with ideas that, until recently, few outside France embraced.

The first European convert was U.K. Prime Minister Gordon Brown, up until now the EU’s most forceful free-marketeer. Brown’s partial nationalization of the British banking system, praised by Sarkozy, unleashed an EU-wide move to pony up at least 2 trillion euros ($2.6 trillion) in capital and loan guarantees for banks.

U.S. Treasury Secretary Henry Paulson subsequently decided to take $250 billion of equity stakes in U.S. lenders, though his $700 billion rescue package was initially intended to buy their bad debt.

Sarkozy’s proposed “toolkit” would broaden the International Monetary Fund‘s mandate and set up a new system to manage the dollar, euro, yen and emerging-market currencies — an impossibly broad agenda that has gotten little traction in Europe and even less in the U.S.


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