Today Monday October 6th 2008, we as a global economy continue our downward spiral. Even as the word of the passing of a $700 Billion dollar bail out with an additional $150 Billion earmarked on the fringes have yet to leave the halls of Washington’s Senate and House buildings. The global crisis has now spread and is engulfing Europe and its markets. There has been a frantic sell off of market based assets and holdings world wide that has sent stocks plummeting downward in the U.S., Europe and Asia.
Russia shut down both its stock markets after they fell more than 15 percent.
Germany’s DAX was down 410.02, or 7.1 percent
Great Britain’s FTSE 100 index lost 391.06 points, or 7.9 percent
France’s CAC-40 dropped 368.77 points, or 9.0 percent
The only bright side to this bleak picture is that the fears of a global recession have caused oil to fall below $90 a barrel. A place that it has not been in almost a year. How soon will gas prices at the pump reflect the barrel price of crude? I would guess that it could take weeks. They crank the gas price up the next morning when crude spikes, but they hold out to the breaking point before they reluctantly reduce the cost at the pump.
Talk of coordinated interest rate cuts from the world’s leading central banks has begun to swirl about. Analysts said they wouldn’t be surprised if the U.S. Federal Reserve, the European Central Bank and the Bank of England instigate the first joint action on interest rates since the 9/11 terrorist attacks on the U.S. in 2001. All three have been dumping Billions of dollars into the financial systems hoping to maintain liquidity.
The current wisdom of the economist mind is that we are going into or are in a recession that will out last the previous two recessions. They seem to agree that it will last about 1 year and be global in scope however will be mild in it’s overall effect. Smart money says buy gold.
The European Union (referred to as the EU) is grinding it’s way deeper into trouble as it’s main financial countries Germany, France, Britain and Italy can not find common ground to get out of this latest problem. Negotiations fell apart when the German Chancellor Angela Merkel announced Sunday that all $786 billion dollars worth of private deposits held in Germany would be guaranteed along with a new $69 billion dollar bailout package for Hypo Real Estate, Germany’s second largest mortgage lender. Additionally Germany has stated that they have no interest in pooling financial resources to serve the EU or offer to take part in a unified plan to insure all of the deposits in the banks of the EU. Of the 27 governments that make up the European Union, Germany is the largest economic power. In direct response to the German Chanellor’ statement, the Danish Economy Ministry said commercial lenders have agreed to contribute up to 35 billion kroner, or about $6.4 billion dollars, over two years to a fund that will help insure account holders from losses. Austrian officials have indicated that they might join in with a contribution as well.
What do you think the debate will be about on Tuesday night?
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