In assessing where we are likely to go next, I will use CBA in place of the index, the SSEC, Gold, Oil, Doctor Copper and particular sector stocks of significance.
First, however, a section a piece in the weekend IHT entitled 'After a crisis, policy makes a difference', by Christina D. Romer, Economics Professor at the UC Berkeley.
Ms Romer's article is worth the read. She speaks of a broad range in assessing financial crisis, drawing her bow across 14 major crisis since 1929. Of course, being good bears, many will say the 1929 panic was a pimple in comparison to the coming crisis (as if we're not in it already!). Bully to them. In the meantime, I acknowledge it does all come down to Merkel. While not deferring to God, or the Spaghetti Monster, as some here do, I prefer to attempt to see what the markets think. I hope to offer this article and my interpretation of our Commonwealth Bank as a guide to where we are likely to go next. Of course, my perennially ebullient nature does get in the way at times. So bear that in mind, if you'll pardon the pun.
Page 14 continues:
"The response to trouble in the banking system also matters. After its banking panic in 1991, Sweden aggressively restored its banks to health. They were nationlized, recapitalized with public funds and returned to private contrrol. After three rough years, Sweden grew rapidly, returning to it precrisis trend. Japan, by contrast, put off cleaning up its banks after its 1992 crisis. Partly as a result, it has struggled for almost two decades with anemic growth and deflation. And, unlike Sweden, it is still far from its precrisis trajectory. So where does this more nuanced interpretation of the evidence leave us? First, as the extreme cases show, financial crisis matter. Left uncontrolled, they can leave an economy in shambles for years. So policy makers need to make the financial system less prone to crisis, and to fight panics aggressively when they arise. This is a lesson that European leaders, sitting on the edge of a financial meltdown and dithering over a solution, should keep foremost in their minds. And it is a cautionary tale for those who would hinder worldwide attempts at stricter financial regulation. Second, the importance of the policy response in determining the effects of crisis argues strongly against complacency. A country as creditworthy as the United States can continue to use fiscal stimulus to help return the economy to full employment. And there is much more the Fed could be doing. Whether the United States continues to fester or finally embarks on a robust recovery depends on whether it chooses to use the tools available."
(20min delay)