Asian and European leaders meeting in Beijing have called for a "comprehensive reform" of the global financial system. At a news conference at the close of the 40-member Asia-Europe Meeting (Asem) on Saturday, Wen Jiabao, the Chinese prime minister, said that greater regulation was needed to avoid another crisis.
The news on markets around the world is particularly dire this morning. Despite a late day rally in the U.S., markets in Asia and Europe are down as much as 9 and 10% and S&P Futures are 60 limit down. This is going to be a very ugly day with market breakers likely to be tested and the Dow breaking through 2002 lows easily at the open. The Independent: Downturn even worse than expected: UK moving 'towards' recession. Yahoo: Stocks dive belief global recession is at hand. Reuters: INSTANT VIEW: Stocks tank at market open. + Markets in tailspin. MarketWatch: Sell-off spans globe.
It's important to remember though that even with these losses, on top of previous losses, Congress still can't find time to make Wall Street bonuses an issue.
Indicators of a worsening social crisis in the US are mounting daily as the economic downturn takes an ever greater toll on jobs. Further layoffs were announced yesterday in the US and around the world. New data was also released showing escalating numbers of American families losing their homes through foreclosure, further driving down house prices.
Let's look at the Panics of 1873 and 2008. Preceding the Panic of 1873 was a boom in railroad building. Preceding the Panic of 2008 was a boom in housing. The Federal government had subsidized construction of such major railroads as the Union Pacific, Central Pacific, and Northern Pacific through land grants and low-interest loans, starting in 1862 and ending in 1869. In the recent housing boom, banks were urged to use their ample reserves to finance home purchases by subpar borrowers. WikiPedia: The Panic of 1873. NationMaster: The Panic of 1873 was a severe nationwide economic depression in the United States that lasted until 1877.
"I made a mistake in presuming that the self interest of organizations, specifically banks and others, was such that they were best capable of protecting their own shareholders and the equity in the firms," Greenspan said. Al Jazeera: Greenspan admits 'flaw' in ideology. The Guardian: Greenspan - I was wrong about the economy. Sort of.
Often referred to as a sub-prime mortgage collapse, this obfuscates the real reason. By associating tangible useless failed mortgages, at least something 'real' can be blamed for the carnage. The problem is, this is myth. The magnitude of this fiscal collapse happened because it was all based on hot air. Financial managers and banking executives were selling the ultimate con to the entire world, akin to the snake-oil salesmen from the 18th century but this time in suits and ties. And by October 2009 it was a quadrillion-dollar (that's $1,000 trillion) industry that few could understand. Propped up by false hope, America is now falling like a house of cards.
Stockmarkets across Asia have suffered fresh falls following yesterday's steep losses in the US and Europe, as the FTSE 100 fell through the 4000-point mark again and Sony issued a shock profit warning. Investors have been spooked by the prospect of a deep, prolonged global recession, with a string of large companies warning that their sales and profits will suffer as the downturn bites.
What we have before us now is a systematic redistribution from the prudent and the responsible to the imprudent and the irresponsible. Did you make your mortgage payments in full when they were due? Were you careful to avoid investing in incomprehensible derivatives whose failure might lead to your bankruptcy? Very good, sir: you are therefore entitled to relinquish substantial amounts of your wealth, either directly through ordinary taxation or indirectly through the “inflation tax” and the diffuse effects of “crowding out” in the loanable-funds market, where the government must soon borrow hundreds of billions of dollars more than expected a few months ago. The People's Voice on 09/28/08: U.S. reaches bailout deal in bid "to stem crisis": The Seektress: Those Who Voted Yes to the Bailout. Existentialist Cowboy: GOP Economics: 'When a Parasite Kills Its Host'. WSWS: Job cuts mount as global recession takes hold. MarketWatch: Weekly jobless claims rise 15,000 to 478,000. Global Research: The Financial Meltdown: This Time Is Different. Lew Rockwell: Warren Buffett, Government Propagandist.
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