Japan closed up 3%, Europe’s up 1-2%. LIBOR dropped another 10 basis points--nothing to write home about, but headed in the right direction. Oil’s up to $73, as a panicked OPEC gets ready to cut production. Gold, that mythological “safe haven” that is still being advertised daily on our general-news radio station, is back up to $810. McCain’s down to 15.9%.
Meanwhile, the real economy. We’ll let Paul Krugman take it away:
Just this week, we learned that retail sales have fallen off a cliff, and so has industrial production. Unemployment claims are at steep-recession levels, and the Philadelphia Fed’s manufacturing index is falling at the fastest pace in almost 20 years. All signs point to an economic slump that will be nasty, brutish — and long.
How nasty? The unemployment rate is already above 6 per cent (and broader measures of underemployment are in double digits). It’s now virtually certain that the unemployment rate will go above 7 per cent, and quite possibly above 8 per cent, making this the worst recession in a quarter-century.
And how long? It could be very long indeed.
Think about what happened in the last recession… the Fed had a hard time getting traction. Despite repeated interest rate cuts, which eventually brought the federal funds rate down to just 1 per cent, the unemployment rate just kept on rising; it was more than two years before the job picture started to improve. And when a convincing recovery finally did come, it was only because Alan Greenspan had managed to replace the technology bubble with a housing bubble.
Now the housing bubble has burst in turn, leaving the financial landscape strewn with wreckage. Even if the ongoing efforts to rescue the banking system and unfreeze the credit markets work — and while it’s early days yet, the initial results have been disappointing — it’s hard to see housing making a comeback any time soon. And if there’s another bubble waiting to happen, it’s not obvious. So the Fed will find it even harder to get traction this time.
In other words, there’s not much Ben Bernanke can do for the economy.
Please note that we’re doing out part–using the magazine cover “soup line” indicator as often as we can to try to help put in a bottom.
See Also: Everything’s Going To Zero
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