WORLD FINANCIAL MARKETS STILL IN ROUGH WATERS

What Will It Take To Calm The Financial Roller Coaster Ride?

We watched as the U.S. Economy drifted into troubled waters: first the housing market bust, then the large financial institutions failing, and now, the stock exchange on Wall Street and its counterparts around the world experiencing tumultuous ups and downs. First one tumbles, then another, then another…like so many dominoes. Will there ever be an end to this dizzying madness?

The American government stepped in and adopted a plan aimed at halting the downward slide of the financial institutions and markets. When things kept sliding, governments around the world, in unison with the United States, synchronized their efforts to bring stability to the markets, evidencing just how tightly connected the global economy really is. The axiom, “What happens in Vegas stays in Vegas,” doesn't appear to hold true anymore.

But, why are we all still experiencing this rocky ride, and how long will it last? Most of the continuing up and down effect is caused by fear and panic, which causes most of us to worry about securing our assets: i.e. pulling our funds out of more risky investments and placing them in more secure places (to include the shoe box under the bed). However, this only exacerbates the situation, causing further tightening of credit, followed by more financial failures and heightened fear and panic…an extremely vicious circle.

Also, fanning the flames of fear, are speculators and day traders taking advantage of the dread in the markets to grab up as much as they can at “bargain basement” prices. Then, when the markets bounce back up, they dump it all back on an already unstable market and collect their “blood money” profits, leaving the markets cash-lean and heading for another tumble.

The good news is, this chaos won’t last forever, or anywhere close to it. And, hopefully, we’ll all learn something from this experience, enough to not repeat the same mistakes. The bad news is, it will take some time for this mess to shake itself out. We’ll probably stay on the roller coaster for, at least, the next several months, and finally stabilizing at the low end by next spring. If most of us get back to some sense of normalcy by the summer, we could see the global markets and national economies began to rebuild, but quite slowly at first.

If there are no other major calamities, we should be back on solid footing by the end of 2009, albeit, at a much lower (and perhaps, more sane) level than before the problems began. The global financial establishment will have to return to reality (and sanity) and avoid some of the more dangerous practices that brought about this crisis. Most of all, there needs to be a return of accountability: financially, ethically, morally, etc. We have to come back to common sense and the realization of a world so totally connected that “…when a butterfly flaps its wings on one side of the globe, the repercussions are truly felt all the way around on the other side.”

Moolanomy

Wikipedia

Harvard Business School

American Bankers Association

The Guardian

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