News item
25 Jan 08
French Roulette
Looking at the financial markets of today, one could say that seeing does not necessarily mean believing. It’s not only that “triple A” rated banks are forced to write off billions as a result of the sub-prime crisis, but also now even safeguards at a French bank seem to have totally failed, causing an unparalleled speculative loss of just short of 5 billion Euros. These are events which, up to just a short while ago, were thought unimaginable.
Conspiracy theories are already making the rounds in the media. One theory is that the scandal in the French bank has been exposed in this way to divert attention from the huge sub-prime write offs. Other media writers suggest that the worst share price falls on the stock exchanges since Sep 11th 2001 have been caused by the liquidation of this speculative share position, so that the US Federal Reserve bank, with its 0.75% interest rate cut, has been practically taken in by a misconception (note: the reasoning behind the decision was given out that on said Monday, the markets in the USA were closed and the hope was to halt the probable market disaster expected on the following Tuesday).
For a change, let us turn our attention to the “real” economy which really matters, and lo and behold, uncertainty is still understandably on a high level. There are, however, positive pieces of news. The expectations of businesses in Germany, expressed by the Ifo business climate index, is better than analysts expected. Furthermore, it would seem that in the USA, private real estate is exchanging hands once more, and that the unemployment rate has stopped growing. In other words, all is not doom and gloom as many prophesiers would have us believe. Yet these bringers of bad tidings are still around, taking every opportunity to report each piece of bad news in such sensational ways, so that businesses still remain cautious, delaying any decision making.