Rescue The World From Depression
No escape, no safe heaven. Around the globe, stock markets are falling. S&P 500, Dow, FTSE, Nikkei 225, Heng Seng, Shanghai, everywhere has been falling. In Russia and Iceland, stock market has to be shut down to avoid further landslide. Corporate bond prices are falling, the return on Treasury bill are at all-time low. Commodity prices are also dropping off the wall. What is there to invest in other than gold?
All of those are caused by fear factors. People, investors in particular, are scared! They fear losses, so they withdraw money, which just further depress the price, a self-fulfilling prophecy. The real problem is when is all of this are going to hit real economy? Probably pretty soon! Banks feared of insolvent, are conserving capitals. Inter-bank rates are at all time high, lending to consumer and corporations are all the lower with record high rate.
No more credits simply means no more spending and possibly pushing many firms into insolvency. Government is scared, they tried everything, from Bail-out to injecting cash, even lower rates. All those so far have failed to shore up the confidences. The question is how can a bunch of scared faces convince others not to?
source: Economists (http://www.economist.com/daily/kallery/displayStory.cfm?story_id=12381847&source=features_box4)
George Liu
george.j.liu@gmail.com
