Monday, October 6, 2008
Are we peeking into the wrong casino?
Without question, the markets are going nuts right now, and some are wondering if the $700 billion promise we have made is going to do a nickel's worth of good. The Dow Jones dipped under 10,000 for the first time in a very long time, and other stock exchanges around the world are also plummeting.
This is definitely a lot of money lost, at least on paper, and no one is saying what to expect next.
But other markets are making me scratch my head, and those are the currency market and the crude oil market. The dollar is showing incredible strength against nearly everything and oil is falling. This chart shows the USD index, which is a mixture of how the dollar is doing against several currencies, most importantly the euro, with the pound, the Canadian dollar, the yen and a few others thrown in for good measure.
The dollar has been go, go, go all summer, but when the big trouble first was announced in mid September, the dollar showed weakness, which I think makes some sense. But soon after it was on the rise again.
If our financial markets are in such a mess, why would people want the money in dollars? The best reason I can come up with is that with this bailout, the fix is in. You might not make money in greenback investments, but it looks like you are guaranteed not to lose.
I want to thank George W. Bush, Henry Paulson, Ben Bernanke, Harry Reid, Nancy Pelosi and all her wonderful pals in Congress for making this cash available to the high rollers against the best advice of the constituents. My own congresscritter Barbara Lee voted against it the first time, but for it the second. I currently do not care if she gets re-elected or not. On the other hand, my old representative Pete Stark voted against it twice, and I'm happy to see that, and wish him all the best.
Even with this massive nonsense five weeks out from a major election, I would still be shocked if the recidivism rate for the House of Non-Representatives dipped below 90%.
I give the last word to my fictional hero, the wise and honest city editor Gus Haynes.