Markets Collapsing

On the eve of tonight's debate between McCain and Obama, the context couldn't be more grim.  Dow_10708Today the US markets continued their plummet: the Dow lost 5.11%, the S&P lost 4.74%, and NASDAQ dropped 5.80%.  A week ago, the Dow was 1,400 points higher.  A year ago, it was 4,500 points higher.  In a particularly ominous sign, it lost 200 points in the final hour. 

Serious economists are worried:

But the market has essentially seized. Nobody wants commercial paper (just like no banks want to lend to each other). Everyone is so freaked out that they all want to hold cash or Treasuries and want to take on absolutely no risk. It is already clear that $700 billion promised to buy toxic assets was not enough to reassure people (as I has worried it might not) to get off their duffs and start lending out their cash, so today the Fed has stepped in with a plan to buy commercial paper and directly inject liquidity into that market.


  • Tom Civiletti (unverified)

    Bubble's burst, chickens are coming home to roost, castles built on sand are no longer enduring, and so on.

    Things look bad, scary bad. It's time to look out for each other and plan a spring garden.

  • Matt W. (unverified)

    Some perspective on Jeff's numbers:

    When Clinton took office (1/20/1993) the Dow was 3241.96 in size. The whole damn thing.

  • RW (unverified)

    Yes, indeed. Time to look out for each other.

  • Unrepentant Liberal (unverified)

    Ah, the 'magic' of the marketplace. Glad I'm not trying to retire quite yet. It was quite a confidence game run by Bush/Cheney and especially the 'genius' former Fed Chairman Alan Greenspan. There will be a special place in hell reserved for him and his Ayn Rand influenced economic ideas.

    It might be time to bring back that old bumper sticker: "Eat the Rich."

  • Joanne Rigutto (unverified)

    I'm with ya Tom. We've got enough acreage to feed our selves, family and neighbors. While it's good to be fairly selfsuficient as far as food goes, if things were to really get that bad, your garden and my farm would probably be nationalized.

    The thing that worries me the most is not nationalization like that, but that the majority of the public would go along with it....

  • mp97303 (unverified)

    In Fortune magazine a couple weeks back, someone who is really good a predicting our stock collapses, said the market would bottom at 8000. Everyone laughed at her. At the rate we are going, we only have one week left before thing start looking up........

  • (Show?)

    People need to remain calm and not panic. I saw someone on the news today explaining that when the Fed announced that it was buying commercial paper (outside the Treasury bailout), he called Congressman Barney Frank and asked if he knew they were planning to do that. Congressman Frank said he not only knew it, but that he and Congressman Spencer Baucus had insisted on it as part of the overall strategy.

    It was also apparent that the stock market today really started tanking when Fed Chair Bernanke didn't indicate they would be lowering interest rates. I'm not convinced that an interest rate reduction would be appropriate right now, although they still might do it.

    If we want banks to make loans, they have to be able to make money doing it. As much as I hate crediting Paul Krugman for anything, we may be approaching the classic "liquidity trap" he's been talking about for years where no one will loan money because the return doesn't justify the risk.

    Still, I don't think it's time to panic yet.

  • mp97303 (unverified)

    I don't know what this means, but during the past month, I have received almost NO credit card offers in the mail. However, in the last two days, I have received 7. Who know, maybe credit is still available?

  • Bill Holmer (unverified)
    <h2>If anyone has any liquidity, current market conditions represent a once in a generation investing opportunity. Not necessarily all at once. Perhaps half now, and half again if the market goes down another 10%. Mark my words. Next year this time you'll be glad you did.</h2>
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