09 October 2008

Interest Rates Cuts did not stop financial Panic

Yesterday's half percent cut of interest rates by the ECB in Frankfurt (left) and the world's other most powerful central banks has failed to halt a slide on the international stock markets, even though the Asian stock exchanges have reacted with some ease this morning.

After a brief rally share prices in most western countries resumed their fall yesterday afternoon, with Dublin's ISEQ index closing down more than 7% at 3054, its lowest value since early 1997.

In London the FTSE index lost more than 5.2% and closed 239 points lower at 4367.

In a joint effort to stem losses coming from the financial markets crisis, coordinated action had been taken by the world's central banks in the morning.

The European Central Bank (ECB), US Federal Reserve and Bank of England cut their key interest rates by half a percentage point. But - obviously - it did not make a difference to the chaos and panic on the financial 'markets'.

The ECB's interest rate now stands at 3.75%, the Bank of England rate is 4.5% and the US Federal Reserve's key rate is already down to 1.5%. One does not have to be a mathematical or financial genius to see that at least the USA have not much leeway left and are approaching the end of the economic line very fast.

The US Federal Reserve said it cut its rate (of previously 2%) "in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures." Translated into plain and understandable English this means: The US economy is in it deepest and most serious crisis since the Great Wall Street Crash of 1929.

The People's Bank of China, the Bank of Canada, the Riksbank in Sweden and the Swiss National Bank have also cut their interest rates by 0.5% in a solidarity action. If it will do some good remains to be seen.

John Hurley (right), governor of the Irish Central Bank, said that the move was "aimed at addressing the global lack of confidence in financial markets and institutions".
He explained that, at a time of weakness in the Irish economy, the move should help to cut business costs and ease the repayment burden on mortgage holders. He hopes it would also encourage investment and reduce strains on financial markets.

But this is really more hope and wishful thinking than plain economic reality. Far too long have the western economies followed the insane and criminal machinations designed and devised by Wall Street and other US financial centres. Irresponsible executives and greedy traders believed that they were on a never-ending gravy train that would bring them personal fortunes at the expense of the world's nations.

Well, this gravy train has been derailed, and ironically by its own drivers, who were too blinded by greed to see the obstacles on the track they were racing down. Now both the train and track are wrecked, and there are numerous casualties all around.
Only the nations, whose money and future criminal bankers have stolen, can repair the damage. They should make sure to hold the culprits of the crash responsible and recover as much of the stolen money as possible. Otherwise the Earth will be plunged into at least a decade of extreme poverty, hardship and chaos, which could easily lead also to new wars and political extremism.

The Emerald Islander


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so where does that leave us?

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