Investors run for cover

Worst panic since World War Two

Thus was judgment of London's Financial Times:

The panic in world credit markets reached historic intensity on Wednesday, prompting a flight to safety of the kind not seen since the second world war.

Business Week's dour assessment:

Investors were getting a lesson in gravity Wednesday.

Not the Newtonian kind, mind you. This was a sharp, sudden education in just how grave the crisis in world financial markets has become, featuring a multibillion dollar bailout of an ailing financial giant with extensive ties to other investment firms, freeze-ups in world credit markets, desperate moves by regulators to curb stock speculators, a new borrowing plan from the Treasury, and a huge jump in gold prices amid rising investor fear.

But maybe the physics part is relevant after all, for the force of all this gravity sent global stock markets sharply lower Wednesday.


Fear was the name of the game Wednesday. Middle East traders were selling securities and buying gold as a result of one of Wall Street's worst-ever financial crises, according to S&P MarketScope. Russian markets were also in financial turmoil.

If the fall of the Berlin Wall reflected the success of the Revolutions of 1989 and the demise of neo-Stalinist socialism, and it did, perhaps the Wall Street crisis will become the signature event marking the end of market fundamentalism (i.e. the supply-side/monetarist revolution and the Washington Consensus).

It ought to be clear, in any case, that Reaganomics (conservative economics) is, as James Galbraith might put it, a 'project which failed,' for "[t]he reality is that the disciplined application of conservative principles to economic policy leads to disaster" (p. 9).


William Greider of The Nation observes:

For the first time in this unfolding financial crisis, I felt personally scared by the news. Not about my money, but about the potential for catastrophe. The Federal Reserve's lightning rescue of AIG has the smell of systemic fear. The house of global finance is on fire and everyone is running for the exits, no sure way to turn them around. What's next? The question itself is ominous, because there are no good answers.

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