Chris Cantell Discusses Financials: Despite All Intentions Markets remain irrational. by Milota Sidorova

Past weekend was rich of international urgent meetings. International Monetary Fund and World Bank’s leaders encountered in Washinghton to declare they are about to help any country regardless its economical development. One might notice kind of humanitarian accent in the event, moreover after extremely irrational market week signing Dow Jones falling more than 18 percent, FTSE’s drop of 20 percent and the most desperate Japan index Nikkei falling 25 percent of its value. General Treasury Henry Paulson has warned IMF of ‘inward-looking policies’ when financial measures were limiting flow of goods, services and capital, literally anything that might prolonged crisis.

Generally announced G7 or the 7 rich nations meeting has proposed several outputs or let’s just say another plan. Question remains what a man is going to do with so many plans and whether such amount of intension doesn’t miss targets. G7 insisted on unfreezing credit movement, governmental stakes in banks such as increasing deposit insurance. The plan has been criticized being much too abstract, lacking the time for action.

Euro Zone leaders met in Paris this weekend to discuss coordinated plan for 15 member countries. Despite British pound limit, French president Nicolas Sarkozy invited also Gordon Brown to participate on the meeting. They all decided to guarantee temporarily refinancing bank’s credit troubles all over the countries using Euro. Sarkozy was expecting the plan should pass through the zone by the end of 2009 and underlined it wasn’t a gift for national banks. More details for ‘European’ rescue plan should be proposed on Wednesday.

However, when considered in general, the markets seem to be still out of control, emotionally freaked despite of numerous unprecedented governmental actions. Britain has passed the biggest bailout and now investigates how much will the main four English banks need.
Despite of serious financial problems that could send Lloyds, Royal Bank of Scotland, RBS and HBOS underwater, the banks are still fighting for their own independency and pride, what in fact makes me smile.
British delegation visited Iceland last weekend to seek for their capital return. This small country in the middle of nowhere has totaled bank debt of 50 billion pounds. With a population of 300,000 and general income of 10 billion pounds this is may be a horror not only for Icelandic people but also for British connecting with the banks.
It seems even synchronized rate cut of several world banks didn’t help at all. Michael Feroli, an economist with JP Morgan expects rising pressures on Fed and following 0.75 percentage point rate cut by December.

American political scene is on fire. While presidential candidates reinforce personal attacks on each other, Congress seems to lose a connection with the reality. Markets demand for first steps from promised ‘$700 billion rescue plan‘. Except of approving $12,2 billion acquisition of troubled Wachovia Corp by Wells Fargo&Co, there’s been nothing more to hear about.
Still Top Democrats insits that the lawmakers will meet to outline ‘second economic plan‘ after November 4. This plan should be finally aimed to ease middle class as they did with financial sector. Democratic Representative Barney Frank mentioned extra $150 billion to extend jobless benefits, foodstamps and financing construction projects such as rebuilding bridges and roads. I’m wondering how much of it will really become true.
As for the U.S. situation remains bleak. Consumer spending, two third fuel engine of economic activities fell 0.6 percent last month. Markets are dropping despite of 3.75 percent point rate cut in past 13 months. Their national debt is the largest in the history. Unemployment is expected to reach 8.5 percent by the end of 2008 and the nominal U.S. economic growth is the weakest since 1954.





related story: http://news.yahoo.com/s/ap/financial_meltdown;_ylt=Ao2vDvzdwZeHe2qAlnmTeoKs0NUE

by Milota Sidorova for PocketNews (http://pocketnews.tv)

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edited by Beata Biskova