World Markets "Shredded" on Worries About Coming Contraction

This is the most awesome presidency in history.

Stock, bonds, commodities, and currencies around the world got destroyed today. Today's drop in the S&P 500 was the worst one since 2011.

Today's calamity was really an extension of yesterday's sell-off, which appeared to be triggered by comments made by Federal Reserve Chairman Ben Bernanke. Specifically, he said that the Fed could begin to taper, or gradually reduce, its quantitative easing program as early as later this year. In other words, they would be scaling back on their monthly purchases of $85 billion dollars worth of mortgage bonds and Treasury securities.

Some argue that the most devastating news was the surge in an obscure Chinese interest rate called SHIBOR, or the LIBOR of China. In 2008, surging LIBOR rates preceded the global credit crunch, causing the global economy and financial markets to spiral.

So we've got that to look forward to.

I find that last point ominous. Seems to me that the US often pulls the rest of the world out of a global recession. But the US hasn't done that. We're limping along. We're not in "recovery" and we're certainly not in growth.

So there's really no backstop, except for other big countries like China.

posted by Ace at 06:41 PM

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