Not so blue in the Democratic corner
It's getting tougher and tougher to say anything positive about the state of the markets at the moment. With banks now collapsing with the readiness of a house of cards in a hurricane, there's little left that can shock. While the persistent cycle of falls and rallies in market values has continued over the last two weeks, the last few days have seen some of the most extreme movements of a tumultuous global market.
The bail out plan suggested and supported by President Bush who, with regards to vociferous opposition to his plan by a majority of Republicans and number of Democrats, opined with characteristic elegance that if “money isn’t loosened up, this sucker could go down.” While they were hardly the words of reassurance that the American people and the global financial community wanted to hear, the utterance has subsequently been proved correct.
This morning after the rejection of the $700 Billion Dollar bail out package by the House of Representatives, the Dow dropped nearly 800 points, with wide repercussions for the markets in London and across the globe. While London has seen something of a rally this afternoon, it’s again news that investors, traders, financiers and ordinary people in the street didn’t want to hear. Although there has been much speculation about the potential effectiveness of Paulson’s plan (the Economist’s cover with Paulson as Uncle Sam, asking for your money, rather than you being a neat visual illustration of the last-ditch efforts to resolve the crisis), what Wall Street didn’t want news of was its rejection.
Already Republicans have blamed House Speaker Pelosi for delivering what they felt was a partisan speech (for an audio account click here) and driving congress towards dumping the plan. At a time where politics and economics are meeting with increased inertia at the hands of spin-doctors eager to settle nerves over a closely contested Presidential election, there’s little wiggle room for those trying to avoid exploitation of the tragedy of many. It’s apparent now that there’s little chance of a government sponsored fix of US economic woes, and this has huge implications for the rest of the world.
What we do know, is that come November, Obama or McCain is going to have to accept the world’s most visible job with the added pressure of righting an economy that’s collapsing around them. As the party traditionally portrayed as most competent with economic matters the Democrats may have been handed the election on a plate. Indeed, aggregates of recent polling (here) have the blue corner back in the lead. What this means for the global economy will reveal itself over the coming months, but in the short-term, we’re sure to endure another hectic, and by now, all too predictable week.
