Our Scotland - www.our-scotland.org

Reluctant Hero

Stock markets across the world tumbled today as the threat of recession looms ever nearer. Is there anything that can be done to avoid it, or is it simply a case of when it happens, not if?

http://news.bbc.co.uk/1/hi/business/7199552.stm

Global shares tumble on US fears

Global stock indexes, including the UK FTSE 100, have fallen their most since the terrorist attacks of September 11 2001 amid fears of a recession.
The FTSE 100 index tumbled 5.5% to 5,578.2, wiping £84bn ($163bn) off the value of its listed shares.

Indexes in Paris and Frankfurt slumped by about 7%, while markets in Asia, India and South America also dropped.

Investors questioned whether a recent plan to boost the US economy would be enough to avert a full-blown recession.

Last week the US government announced a financial stimulus plan which would involve about $145bn in tax cuts to encourage spending.

US markets are closed for a public holiday on Monday and reopen on Tuesday but other markets worldwide reacted negatively to the US plans.

Francis Lun of Fulbright Securities in Hong Kong said the falls stemmed from disappointment that the US stimulus was "too little, too late" adding that investors felt "it wouldn't help the economy recover".

'Panic mode'

The worry is that tax breaks and spending measures will not be enough to boost consumer spending in the US, because deeper economic problems remain.

In particular, the slowing housing market and problems in the sub-prime sector - which lends to those with limited or no credit histories - has contributed to a slowdown.

"We're falling back into the crisis of confidence in the financial sector," said Hugues Rialan, of Robeco France.

"The banks have been reassuring the market over their exposure to US mortgage-related investments, but now we realise there is nothing reassuring about it," he said.

Finance firms were among the main fallers, with Dutch ING Group, Germany's Allianz and Swiss Re all falling about 10%, while Royal Bank of Scotland shed 8%.

FTSE100 - WORST DAYS
20/10/87 down 12.2%
19/10/87 down 10.8%
26/10/87 down 6.2%
11/09/01 down 5.7%
22/10/87 down 5.7%

Many shoppers are struggling under higher mortgage repayment costs, prompting default rates to surge, especially among sub-prime borrowers.

This has prompted banks to tighten their lending policies after losing huge amounts of investments linked to the US housing and mortgage markets.

Dominique Strauss Kahn, the head of the International Monetary Fund, said the global economic situation was "serious" and that all countries in the world were suffering in the wake of a slowdown in US growth.

The state of the US economy is crucial for many of Europe's and Asia's biggest companies because it is one of their biggest export markets.

FTSE100 - BEST DAYS
21/10/87 up 7.9%
13/03/03 up 6.1%
10/04/92 up 5.6%
15/10/02 up 5.1%
25/07/02 up 5.0%

Any slowdown in demand is likely to hurt corporate profit growth and push share prices even lower, analysts have warned.

But some analysts took comfort from the prospect of falling US interest rates.

"If interest rates are cut to the extent we and others expect, the likelihood is that today's share prices will look like silly values in 12 months' time, if not before," said Mike Lenhoff at Brewin Dolphin Securities.

Global trend

Markets in China, India, South Korea, Singapore, Taiwan and the Philippines all fell.

In Mumbai, the main Sensex index fell 1,408 points, or 7.4%, adding to an 8% fall last week. Hong Kong's Hang Seng slumped 1,383.0 points, or 5.5%, to close at 23,818.9. Tokyo's main Nikkei 225 index fell 3.9%.

We're in the danger zone now

Bob Parker,
Credit Suisse Asset Management

Learn about the 'bear market'

Australia's benchmark ASX 200 index closed down 2.9%, or 166.9, points at 5,580.4, which is its lowest level for a year.

It was also the 11th consecutive negative day for the index, the longest losing streak in more than 25 years.

"People are certainly nervous about a potential recession in the US spilling over to the rest of the world," said David Cohen at Action Economics.

So far this year, Japan's Nikkei has dropped 13%, the Hang Seng is down more than 14% and China's main Shanghai index has slipped almost 7%.

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azzuri · 'Our Scotland' Fossil Joined: 12 Sep 2005 Posts: 3777

when, not if.

the credit crunch is taking hold. hang on, we're due for a bumpy landing...

best things to be holding just now are gold and cash.
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Holebender · Posted: Tue Jan 22, 2008 6:51 am Post subject:

Stock markets are fickle things and there's a lot of herd mentality involved. The best thing is to take a long-term view rather than worrying about day-to-day fluctuations.

Still, I wish I'd offloaded some of my company shares when they peaked before Christmas.
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William_Cleland · This is Ma' Life! Joined: 22 Apr 2007 Posts: 777

On the bright side the world economy isn't as dominated by the United States as it used to be so a deep recession there doesn't necessarily mean a global depression.

azzuri · 'Our Scotland' Fossil Joined: 12 Sep 2005 Posts: 3777

Doesn't matter though, the global economy still looks to the USA to lead the way and we have shadowed their ecomony during the last cycle, meaning the same problems they have now will arrive on these shores during the next 12 months.

Seems like Gordon Brown's 'no more boom and bust' line was just a load of s***e (no surprise there!).

the root of the problem is the FIAT money system we have, it's just paper backed up with absolutely f**k all. The way the banks can just print their way out of trouble eventually leads to these scenarios, IMO we need to return to the days of gold-backed currencies.
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"Every single person on this planet is unique. Just like everyone else..." - Random Guy in Edinburgh Pub

Possibly the funniest site in the world, 'The Daily Mash' - http://www.thedailymash.co.uk/

Reluctant Hero · Posted: Tue Jan 22, 2008 10:58 pm Post subject:

US Federal Reserve cut interest rates by 0.75% today. Clutching at straws is the expression that springs to my mind.

http://news.bbc.co.uk/1/hi/business/7202645.stm
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Holebender · Posted: Tue Jan 22, 2008 11:50 pm Post subject:

That's such an obvious panic move that it will only feed the problem, not calm it. Still, I imagine other central banks will be forced to follow suit now.
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"My instinct is to agree with your opinion of his verse, but I've never so much as glanced at it." - agentmancuso

William_Cleland · This is Ma' Life! Joined: 22 Apr 2007 Posts: 777

azzuri · 'Our Scotland' Fossil Joined: 12 Sep 2005 Posts: 3777

azzuri · 'Our Scotland' Fossil Joined: 12 Sep 2005 Posts: 3777

Like any sort of spoof, the 'Daily Mash' report has more than a grain of truth in it,

Reluctant Hero · Posted: Wed Jan 23, 2008 12:26 pm Post subject:

Looks like the Fed's announcement has done nothing to halt the slide on the FTSE. At midday, it is down 100 points.

Says they are looking for the Bank of England to follow the Fed's lead, but there is no way they will do that. I guess, for the FTSE, it will be a case of where is the bottom.

William_Cleland · This is Ma' Life! Joined: 22 Apr 2007 Posts: 777

So much for staying out of the Euro and having a "special relationship" with the Americans, something incidentally that the average American stares at you blankly about if you mention it to them. Smile

Here's what George Soros thinks is about to happen:-

http://news.bbc.co.uk/2/hi/business/7204159.stm

"I'm not looking for a worldwide recession," he said.

"I'm looking for a significant shift of power and influence away from the US in particular and a shift in favour of the developing world, particularly China."

Reluctant Hero · Posted: Wed Jan 23, 2008 9:02 pm Post subject:

Good article in the Guardian about what it is like to live through a recession.

http://www.guardian.co.uk/g2/story/0,,2245165,00.html
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William_Cleland · This is Ma' Life! Joined: 22 Apr 2007 Posts: 777

New experience for many of you. Smile

If you have a safe predictable job particularly in the public sector it's not that big a deal and life goes on as usual. Not fun to be unemployed, however, so the trick is staying on the right side of that divide possibly by taking a job you normally would give the body swerve.

Red Justice · Posted: Thu Jan 24, 2008 9:15 am Post subject:

It seems the US and global capitalist system has met yet another crisis perhaps too much reliance on free market economics. I am not strong on economics so I will have to give an overview of my assessment.

I think we are going to see higher inflation in Scotland and the Scottish tourist industry could suffer big time particularly from the US visitors. A recession will hit borrowers especially those with mortgages as interest rates wll increase in the longer term and the banks could put a further squeeze on lending. Certainly higher inflation is bad news for the poor and working class which would be exacerbated by increased unemployment.

But what should be done within the constraints of capitalism? As I say I am not an economist but I think the US has relied for a long time on a deregulated free market and may have to go for a more regulated economy like during the times of Jimmy Carter. The US have some big problems in the housing market, using lower interest rates to chase all kinds of investment like mortgages, too much heavy taxation like the UK and probably like in Brown's Britain too much past reliance on credit.

The problem as I see it won't be solved by a shot in the arm like the US has done by cutting interest rates. The economic problems are needing long term solutions. Like ways of getting money in peoples pockets and new forms of investment like in green infastructure. I would like to see real investment in Scotland to boost our economy and us not have to rely on a false British free market economy. But we need a more regulated economy and infastructure investment. Why not start a massive building programme in public housing and get the construction industry going again? That is real investment not false investment like Brown's economics were particularly before he was PM. As a socialist I am for planning in the economy and tangible investment for infastructure. Financial markets for me are obscene when left to their own devices, create grotesque inequality. They don't regulate themselves so human beings need to regulate economies by real investment which would be best served by socialist planning. I am afraid the Scottish people are going to have to ride this longer term recessionn storm as they can often be their own worst enemy. The Murdoch press, capitalists or politicians in Westminster or London will not provide them with answers for this financial capitalist mess. As for the rest of the world then without a Soviet Union but still even with economies like India and China, Uncle Sam is the largest big gun and wants to rock as the world imperialist in wars and economy as the bourgeois liberals in the West will know and think.

As I pointed out I am not an expert in this but sense the capitalists in the US and London really need a long term recovery programme for the economy and not a mere sticking plaster like the US and Bush has done by a mere cut in interest rates.

As for Scotland we should break with London and create an Independent Socialist Scotland that can reinvest big time in infastructure for the Scottish economy. The choice lies with us Scots sink or swim over the next number of years.
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agentmancuso · Posted: Thu Jan 24, 2008 4:57 pm Post subject:

Holebender · Posted: Fri Jan 25, 2008 12:04 am Post subject:

"Red Justice", it's better to hold your tongue and be thought a fool than to open your mouth and prove yourself a fool. Really, you would have been better off just keeping quiet than posting the drivel above.
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"My instinct is to agree with your opinion of his verse, but I've never so much as glanced at it." - agentmancuso

Red Justice · Posted: Fri Jan 25, 2008 1:27 am Post subject:

Reluctant Hero · Posted: Wed Jan 30, 2008 11:17 pm Post subject:

The Fed are really going to town on US interest rates, cutting another 0.5% off it today! This is just 9 days after they reduced it by 0.75%. Think this quote sums this move up

azzuri · 'Our Scotland' Fossil Joined: 12 Sep 2005 Posts: 3777

Bye bye toilet paper dollar... Wink

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"Every single person on this planet is unique. Just like everyone else..." - Random Guy in Edinburgh Pub

Possibly the funniest site in the world, 'The Daily Mash' - http://www.thedailymash.co.uk/